SME_8e_Ch_22_Section_2 - CHAPTER 22 SECTION 2 DECISION...

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1 CHAPTER 22 SECTION 2: DECISION ANALYSIS MULTIPLE CHOICE 63. Which of the following statements is correct? a. The EMV criterion selects the act with the largest expected monetary value. b. The EOL criterion selects the act with the smallest expected opportunity loss. c. The expected value of perfect information (EVPI) equals the smallest expected opportunity loss. d. All of these choices are true. ANS: D PTS: 1 REF: SECTION 22.2 64. The expected value of perfect information is the same as the: 65. The expected value of sample information (EVSI) is the difference between: 66. The procedure for revising probabilities based upon additional information is referred to as: 67. The difference between expected payoff under certainty and expected value of the best act without certainty is the: a. expected monetary value. b. expected net present value. c. expected value of perfect information. d. expected rate of return. ANS: C PTS: 1 REF: SECTION 22.2
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2 68. The minimum expected opportunity loss is also equal to the: 69. Which of the following statements is correct? TRUE/FALSE 70. Removal of uncertainty from a decision-making problem leads to a case referred to as perfect information. ANS: T PTS: 1 REF: SECTION 22.2 71. The preposterior analysis determines whether or not sample information should be purchased to revise the prior probabilities associated with the states of nature. ANS: T PTS: 1 REF: SECTION 22.2 72. The expected value of perfect information (EVPI) is the difference between the expected payoff with perfect information (EPPI) and the expected monetary value (EMV * ). That is, EVPI = EPPI - EMV * .
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