# Quiz 13: Decision Analysis

Business

Q 1Q 1

The options from which a decision maker chooses a course of action are
A) called the decision alternatives.
B) under the control of the decision maker.
C) not the same as the states of nature.
D) All of the alternatives are true.

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Multiple Choice

D

Q 2Q 2

States of nature
A) can describe uncontrollable natural events such as floods or freezing temperatures.
B) can be selected by the decision maker.
C) cannot be enumerated by the decision maker.
D) All of the alternatives are true.

Free

Multiple Choice

A

Q 3Q 3

A payoff
A) is always measured in profit.
B) is always measured in cost.
C) exists for each pair of decision alternative and state of nature.
D) exists for each state of nature.

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Multiple Choice

C

Q 4Q 4

Making a good decision
A) requires probabilities for all states of nature.
B) requires a clear understanding of decision alternatives, states of nature, and payoffs.
C) implies that a desirable outcome will occur.
D) All of the alternatives are true.

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Multiple Choice

Q 5Q 5

A decision tree
A) presents all decision alternatives first and follows them with all states of nature.
B) presents all states of nature first and follows them with all decision alternatives.
C) alternates the decision alternatives and states of nature.
D) arranges decision alternatives and states of nature in their natural chronological order.

Free

Multiple Choice

Q 6Q 6

Which of the methods for decision making best protects the decision maker from undesirable results?
A) the optimistic approach
B) the conservative approach
C) minimum regret
D) minimax regret

Free

Multiple Choice

Q 7Q 7

Sensitivity analysis considers
A) how sensitive the decision maker is to risk.
B) changes in the number of states of nature.
C) changes in the values of the payoffs.
D) changes in the available alternatives.

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Multiple Choice

Q 8Q 8

To find the EVSI,
A) use the EVPI to calculate sample information probabilities.
B) use indicator probabilities to calculate prior probabilities.
C) use prior and sample information probabilities to calculate revised probabilities.
D) use sample information to revise the sample information probabilities.

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Multiple Choice

Q 9Q 9

If P(high) = .3, P(low) = .7, P(favorable | high) = .9, and P(unfavorable | low) = .6, then P(favorable) =
A) .10
B) .27
C) .30
D) .55

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Multiple Choice

Q 10Q 10

The efficiency of sample information is
A) EVSI*(100%)
B) EVSI/EVPI*(100%)
C) EVwoSI/EVwoPI*(100%)
D) EVwSI/EVwoSI*(100%)

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Multiple Choice

Q 11Q 11

Decision tree probabilities refer to
A) the probability of finding the optimal strategy
B) the probability of the decision being made
C) the probability of overlooked choices
D) the probability of an uncertain event occurring

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Multiple Choice

Q 12Q 12

For a maximization problem, the conservative approach is often referred to as the
A) minimax approach
B) maximin approach
C) maximax approach
D) minimum approach

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Multiple Choice

Q 13Q 13

For a minimization problem, the optimistic approach is often referred to as the
A) minimax approach
B) maximin approach
C) maximax approach
D) minimum approach

Free

Multiple Choice

Q 14Q 14

For a maximization problem, the optimistic approach is often referred to as the
A) minimax approach
B) maximin approach
C) maximax approach
D) minimum approach

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Multiple Choice

Q 15Q 15

For a minimization problem, the conservative approach is often referred to as the
A) minimax approach
B) maximin approach
C) maximax approach
D) minimum approach

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Multiple Choice

Q 16Q 16

In an influence diagram, decision nodes are represented by
A) circles or ovals
C) diamonds
B) squares or rectangles
D) triangles

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Multiple Choice

Q 17Q 17

Which of the following approaches to decision making requires knowledge of the probabilities of the states of nature?
A) minimax regret
C) expected value
B) maximin
D) conservative

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Multiple Choice

Free

True False

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True False

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True False

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True False

Q 22Q 22

Circular nodes in a decision tree indicate that it would be incorrect to choose a path from the node.

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True False

Q 23Q 23

Risk analysis helps the decision maker recognize the difference between the expected value of a decision alternative and the payoff that may actually occur.

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True False

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True False

Q 25Q 25

Expected value is the sum of the weighted payoff possibilities at a circular node in a decision tree.

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True False

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True False

Q 27Q 27

After all probabilities and payoffs are placed on a decision tree, the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.

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True False

Q 28Q 28

A decision strategy is a sequence of decisions and chance outcomes, where the decisions chosen depend on the yet to be determined outcomes of chance events.

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True False

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True False

Q 30Q 30

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

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True False

Q 31Q 31

Maximizing the expected payoff and minimizing the expected opportunity loss result in the same recommended decision.

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True False

Q 32Q 32

The expected value of sample information can never be less than the expected value of perfect information.

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True False

Q 33Q 33

The minimum expected opportunity loss provides the best decision, regardless of whether the decision analysis involves minimization or maximization.

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True False

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Essay

Free

Essay

Q 36Q 36

If sample information is obtained, the result of the sample information will be either positive or negative. No matter which result occurs, the choice to select option A or option B exists. And no matter which option is chosen, the eventual outcome will be good or poor. Complete the table.

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Essay