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# 1 1907 chapter 01 an introduction to business

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Unformatted text preview: a decision in an environment of ________________, the likelihood of each state of nature can be estimated. A. Certainty B. Uncertainty C. Risk D. Alternatives AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Medium Learning Objective: 1 Topic: Decision Theory 21. The _______________________ is the difference between the expected payoff that would have been realized had the best alternative action been selected if we know which state of nature has occurred and the expected payoff under risk. A. Maximax criterion B. Maximin criterion C. Expected utility D. Expected value of perfect information E. Expected value of sample information AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Hard Learning Objective: 2 Topic: Posterior Analysis 22. The _______________________ is the difference between the expected payoff of sampling and the expected payoff based on expected monetary criterion and prior probabilities. A. Maximax criterion B. Maximin criterion C. Expected utility D. Expected value of perfect information E. Expected value of sample information AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Hard Learning Objective: 2 Topic: Posterior Analysis 1-1914 Chapter 01 - An Introduction to Business Statistics 23. The expected value criterion is used for decision-making under __________________. A. Certainty B. Uncertainty C. Risk D. Alternatives AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Medium Learning Objective: 1 Topic: Decision Theory 24. Maximax is a criterion used when making decisions under __________________. A. Certainty B. Uncertainty C. Risk D. Alternatives AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Medium Learning Objective: 1 Topic: Decision Theory 25. A person's utility is determined by the preferences he/she exhibits for decision choices involving __________. A. Certainty B. Uncertainty C. Risk D. Bayes' Theorem AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Medium Learning Objective: 3 Topic: Utility Theory 1-1915 Chapter 01 - An Introduction to Business Statistics 26. The _____________________ criterion is attractive to those decision-makers who exhibit a neutral approach towards decision choices involving risk. A. Expected utility B. Expected value C. Maximin D. Maximax E. Decision theory AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Hard Learning Objective: 2 Topic: Posterior Analysis 27. When we assess the worth of sample information in a decision making problem, we are performing a: A. Prior analysis B. Preposterior analysis C. Posterior analysis D. Payoff analysis E. Utility analysis AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Medium Learning Objective: 2 Topic: Posterior Analysis 28. The expected net gain of sampling equals the expected ______________ minus the cost of sampling. A. payoff of sampling B. payoff of no sampling C. value of Sample Information D. value of Perfect Information E. utility AACSB: Reflective Thinking Bloom's: Knowledge Difficulty: Medium Learning Objective: 2 Topic: Posterior Analysis 1-1916 Chapter 01 - An Introduction to Business Statistics 29. The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (Si) represent the levels of demand for the company products. S1, S2 and S3 characterize high, medium, and low demand respectively. The payoff values are in thousands of dollars. The best alternative (course of action) for the EKA manufacturing company using the maximin criterion is strategy __ and the best possible payoff is _____. A. 1, \$50,000 B. 2, \$120,000 C. 1, \$100,000 D. 2, \$70,000 E. 2, \$80,000 AACSB: Analytic Skills Bloom's: Analysis Difficulty: Medium Learning Objective: 1 Topic: Decision Theory 1-1917 Chapter 01 - An Introduction to Business Statistics 30. The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (S1) represent the levels of demand for the company products. S1, S2 and S3 characterize high, medium, and low demand with probabilities of .3, .6 and .1 respectively. The payoff values are in thousands of dollars. Find the expected monetary value for each of the alternatives and determine the best alternative (course of action) for the EKA manufacturing company using the expected monetary value criterion. A. EMV1 = \$98,000, EMV2 = \$95,000, choose strategy 1 B. EMV1 = \$88,000, EMV2 = \$95,000, choose strategy 2 C. EMV1 = \$88,000, EMV2 = \$85,000, choose strategy 1 D. EMV1 = \$66,667, EMV2 = \$76,667 choose strategy 2 E. EMV1 = \$120,000, EMV2 = \$110,000, choose strategy 1 AACSB: Analytic Skills Bloom's: Application Difficulty: Medium Learning Objective: 1 Topic: Decision Theory 1-1918 Chapter 01 - An Introduction to Business Statistics 31. The alternatives 1 and 2 in the following pa...
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