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Exam 21: Extension 5: Decision Theory

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Question 31

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For what range of probability that demand will be high, will she decide to lease the medium facility?

A) 0 - .25
B) 0 - .33
C) .25 - .5
D) .33 - 1
E) .5 - 1

F) A) and E)
G) A) and B)

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Question 32

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If she uses the maximax criterion, how many beauticians will she decide to hire?

A) one
B) two
C) three
D) either one or two
E) either two or three

F) C) and D)
G) A) and E)

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Question 33

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When a decision-making scenario involves two or more departments, if the individual departments pursue what is optimal for them, sometimes the overall organization suffers.This is an example of _____________.

What is the expected value for the decision alternative to write the economics book?

A manager has learned that annual profits from four alternatives being considered for solving a capacity problem are projected to be $15,000 for A, $30,000 for B, $45,000 for C, and $60,000 for D if state of nature 1 occurs; and $60,000 for A, $80,000 for B, $90,000 for C, and $35,000 for D if state of nature 2 occurs. (A) Assuming maximax is used, what alternative would be chosen? (B) Assuming maximin is used, what alternative would be chosen? (C) If P(State of Nature 1) is .40, what alternative has the highest expected monetary value? (D) Determine the range of P(S2) for which each alternative would be optimal.

If she feels there is a 30% chance that demand will be high, what is her expected payoff under certainty?

If she feels the chances of low, medium, and high compliance are 20%, 30%, and 50% respectively, what is her expected value of perfect information?

If he uses the maximin criterion, which kind of dwellings will he decide to build?

What is the probability that the statistics book would wind up being placed with a smaller publisher?

The minimax regret strategy would be:

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

If the minimum expected regret is computed, it indicates to a decision-maker the expected:

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

What is the probability that the heart lab will be funded in both the first and second years?

The expected monetary value criterion (EMV) is the decision-making approach used with the decision environment of:

The minimax regret strategy would be:

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

What is the expected value for the decision alternative to select the heart lab?

If P(high) is .60, the choice for maximum expected value would be:

If he feels the chances of low, normal, and high precipitation are 30%, 20%, and 50% respectively, what is his expected value of perfect information?