Operations Management Study Set 5

The expected monetary value approach is most appropriate when the decision maker is risk neutral.

In reaching a decision, the alternative with the lowest cost should be ranked number 1.

Among decision environments, risk implies that certain parameters have probabilistic outcomes.

A weakness of the maximin approach is that it loses some information.

Increasing productivity and also quality will result in increased effective capacity.

The expected value of perfect information is inversely related to losses predicted.

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

The maximax approach is a pessimistic strategy.

Decision trees, with their predetermined analysis of a situation, are really not useful in making health care decisions since every person is unique.

The Laplace criterion treats states of nature as being equally likely.

Among decision environments, uncertainty implies that states of nature have wide-ranging probabilities associated with them.

Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

Design capacity refers to the maximum output rate that can be achieved under ideal conditions.

In decision theory, states of nature refer to possible future conditions.

The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

The maximin approach involves choosing the alternative with the highest payoff.

Bounded rationality refers to the limits imposed on decision making because of costs, human abilities, time, technology, and/or availability of information.

Expected monetary value gives the long-run average payoff if a large number of identical decisions could be made.

Capacity decisions are usually one-time decisions; once they have been made, we know the limits of our operations.

The maximin approach involves choosing the alternative that has the "best worst" payoff.