Assignment 1

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The criteria used in a preference matrix

can be scored on any scale.

All of the following statements are true of decision trees​ EXCEPT:

A. Square nodes represent decision points. B. Payoffs are often expressed as the present value of net profits. C. The expected payoff must always equal zero. *** D. Probabilities for all branches leaving a chance node must always sum to 1.0.

In Decision​ Theory, decision elements that have an impact on the outcome of the choice but are not under the​ manager's control are called

All the above a. states of nature b. events c. chance events

The formal procedure that helps the manager choose the best alternative when outcomes are uncertain is which of the following​ procedures?

Decision theory

For decision making under​ uncertainty, identify the decision rule that is appropriate for the optimist.

Maximax

What​ decision-making condition must exist for the decision tree to be a valuable​ tool?

Risk

Which statement regarding​ break-even analysis is​ best?

The slope of the total cost line is the variable cost.

Decision making situations that include which of the following characteristics require a Preference Matrix​ approach?

multiple criteria cannot be merged into a single measure

The branches leaving a chance node on a decision tree must

sum to 1.0

​Graphically, what occurs at the​ break-even quantity?

the total revenue line crosses the total cost line

After drawing a decision​ tree, we solve it by working from right to left. When calculating the expected payoff for each event​ node,

we multiply the payoff of each event branch by the​ event's probability and then add these products.

Which one of the following statements about​ break-even analysis, as we applied it to evaluating products or​ services, is​ best?

​Break-even analysis assumes that the cost function is linear and consists of fixed costs plus variable cost times volume.


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