quant exam 2

All EXCEPT which of the following steps are taken to analyze problems with decision​ trees?

Assign probabilities to the alternatives.

What is an alternative name for a decision​ table?

. payoff table

A company is considering producing a new​ children's bar soap. A market research firm has told the company that if they perform a​ survey, a positive survey of a favorable market occurs 65 percent of the time. That​ is, P​ (positive survey​ ∣ favorable​ market) = 0.65.​ Similarly, 40 percent of the time the survey falsely predicts a favorable​ market; thus, P​ (positive survey​ ∣ unfavorable​ market) = 0.40. These statistics indicate the accuracy of the survey. Prior to contacting the market research​ firm, the​ company's best estimate of a favorable market was 50 percent.​ So, P​ (favorable market)​ = 0.50 and P​ (unfavorable market)​ = 0.50. Using​ Bayes' theorem, determine the probability of a favorable market given a favorable survey.

0.62

How much money should a firm be willing to spend to obtain a perfect market​ forecast?

EVwPI−Maximum EMV

All decisions that result in a favorable outcome are considered to be good decisions.

False

An example of expected monetary value would be the payoff from selecting a particular alternative when a particular state of nature occurs.

False

Decision trees and decision tables can both solve problems requiring a single​ decision, but decision tables are the preferred method when a sequence of decisions is involved.

False

Expected monetary value​ (EMV) is the payoff you expect to occur when you choose a particular alternative.

False

In a decision​ tree, a square symbol represents a state of nature node.

False

Optimistic decision makers tend to discount favorable outcomes.

False

The expected value of perfect information is the same as the expected value with perfect information.

False

A decision table is sometimes called a payout​ (payoff?) table.

True

A state of nature is an occurrence or a situation over which the decision maker has little or no control.

True

Analytic decision making is based on logic and considers all available data and possible alternatives.

True

Any problem that can be presented in a decision table can also be graphically portrayed in a decision tree.

True

In a decision​ tree, the expected monetary values are computed by working from right to left.

True

The expected monetary value of a decision alternative is the sum of all possible payoffs from the​ alternative, each weighted by the probability of that payoff occurring.

True

Decision trees are particularly useful when

a sequence of decisions must be made.

​Bayes' theorem enables decision makers to revise probabilities based on

additional information.

What are listed down the left side of a decision​ table?

alternatives

Decision​ trees:

are especially powerful when a sequence of decisions must be made.

A problem that involves a sequence of​ decisions:

can be better analyzed with a decision tree than by a decision table.

A primary advantage of decision trees compared to decision tables is that decision​ trees:

can be used for sequential problems.

In the construction of decision​ trees, which of the following shapes represents a state of nature​ node?

circle

What decision tree symbol represents a​ state-of-nature node?

circle

The first​ step, and a key​ element, in the​ decision-making process is​ to:

clearly define the problem.

What is a tabular means of analyzing decision alternatives and states of​ nature?

decision table

The text presents which two analytic tools to help with decision​ making?

decision tables and decision trees

Pessimistic decision makers tend to

discount favorable outcomes.

A decision tree is​ a(n):

graphical representation of alternatives and states of nature.

The last step of the​ decision-making process is​ to:

implement the decision.

Which​ decision-making rule is known as a​ "pessimistic" decision​ criterion?

maximin

A pessimistic decision making criterion is

maximin.

What is a tabular presentation that shows the outcome for each decision alternative under the various possible states of nature​ called?

payoff table

Another name for a decision table is a

payoff table.

When solving decision​ trees, what phrase represents the act of dropping an alternative from consideration because it is less favorable than another available​ option?

prune the branch

What decision tree symbol represents a decision​ node?

square

In terms of decision​ theory, an occurrence or situation over which the decision maker has no control is called​ a(n):

state of nature

What is an occurrence or a situation over which the decision maker has little or no​ control?

state of nature

What are listed across the top of a decision​ table?

states of nature

The expected value with perfect information​ is:

the expected return obtained when the decision maker knows which state of nature is going to occur before the decision is made.

A square node on a decision tree infers​ that:

there are several alternatives available. the manager must choose an alternative. Both B and C.