chap17-TIF-SMUME5e

chap17-TIF-SMUME5e - Decision Making 95 CHAPTER 17:...

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Unformatted text preview: Decision Making 95 CHAPTER 17: DECISION MAKING 1. A tabular presentation that shows the outcome for each decision alternative under the various states of nature is called: a) a payback period matrix. b) a decision matrix. c) a decision tree. d) a payoff table. ANSWER: d TYPE: MC DIFFICULTY: Easy KEYWORDS: payoff 2. 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. ANSWER: c TYPE: MC DIFFICULTY: Easy KEYWORDS: expected value of perfect information 3. A medical doctor is involved in a $1 million malpractice suit. He can either settle out of court for $250,000 or go to court. If he goes to court and loses, he must pay $825,000 plus $175,000 in court costs. If he wins in court the plaintiffs pay the court costs. Identify the actions of this decision-making problem. a) Two choices: (1) go to court and (2) settle out of court. b) Two possibilities: (1) win the case in court and (2) lose the case in court. c) Four consequences resulting from Go/Settle and Win/Lose combinations. d) The amount of money paid by the doctor. ANSWER: a TYPE: MC DIFFICULTY: Easy KEYWORDS: courses of action 4. A medical doctor is involved in a $1 million malpractice suit. He can either settle out of court for $250,000 or go to court. If he goes to court and loses, he must pay $825,000 plus $175,000 in court costs. If he wins in court the plaintiffs pay the court costs. Identify the states of nature of this decision-making problem. a) Two choices: (1) go to court and (2) settle out of court. b) Two possibilities: (1) win the case in court and (2) lose the case in court. c) Four consequences resulting from Go/Settle and Win/Lose combinations. d) The amount of money paid by the doctor. ANSWER: 96 Decision Making b TYPE: MC DIFFICULTY: Easy KEYWORDS: states of the world 5. A medical doctor is involved in a $1 million malpractice suit. He can either settle out of court for $250,000 or go to court. If he goes to court and loses, he must pay $825,000 plus $175,000 in court costs. If he wins in court the plaintiffs pay the court costs. Identify the outcomes of this decision-making problem. a) Two choices: (1) go to court and (2) settle out of court. b) Two possibilities: (1) win the case in court and (2) lose the case in court. c) Four consequences resulting from Go/Settle and Win/Lose combinations. d) The amount of money paid by the doctor. ANSWER: c TYPE: MC DIFFICULTY: Easy KEYWORDS: outcomes 6. A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year. If the expanded advertising campaign is successful, the company expects sales to increase by $1.6 million next year. If the advertising campaign fails, the company expects sales to increase by only $400,000 next year. If the advertising budget is not increased, the company expects sales to increase by $200,000. Identify the states of nature in not increased, the company expects sales to increase by $200,000....
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chap17-TIF-SMUME5e - Decision Making 95 CHAPTER 17:...

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