Ch 5 Ivy Software Business Math & Stats

a market research survey is available for $10,000. using decision tree analysis, found that EMV of survey $65,000. EMV with not survey of $62,000. whats EMV of info from sample

65,000-62,000= 3,000 survey is worth

when alternatives with decreased expected returns are eliminated you should erase them from a decision diagram. true or false

false, you should prune branches of a decision tree not erase them, so others can see what you've done

samantha will open 1 of 5 doors, prize behind 2 of those doors if theres a prize behind the door, she will grab it. how many branches of decision diagram have an event node after decision node

five

decision tree

graph rep of problem, possible consequences and attributes of each consequence, each alternative is a branch of a tree, branches connected by open circles or squares

hunters determining whether 18th cent pirates buried treasure. figure if they find early settlement theres good chance treasure is buried there, which of the following represents left and most event/decision node of hunters decision....

hunters find or dont find signs of settlement

the value of the decision node

is the value of next node of branch decision maker decides to take

which of following would be best represented by decision node

jill goes to work for one of 2 firms who have offered her a position

Tim hasn't been doing well in class, prof tells him to write case analysis to pass. he can still pass class without write up, just like he can still fail with it since final exam is coming up which decisions has vertical line at end

none

in representing continuous uncertainty using Pearson Tukey Method, its necessary to assess only these fractiles

none assess .05, .5, .95 and multiply outcome by probs .185, .63, .185

event nodes

rep by circles, rep points of uncertainty where 1/2 or more things will happen out of control of decision maker.

decision nodes

rep by squares, decision must be made among 2 or more alternatives.

the alternatives depicted on branches of decision tree must be

all of he above (mutually exclusive and collectively exhaustive)

the EMV utilizes

averages

decomposition

breaking a decision down into manageable parts to come to a conclusion, integral to decision analysis. steps 1. define problem 2. analyze alternatives and consider possible results of each alternative 3. decision

value of an event node is

expected value of branches emanating from it

decision maker determines which branch to follow from an event node true or false

false

construction of a decision tree with subsequent evaluation eliminates uncertainty in a decision making process, true or false

false decision tree used to graphically rep alt decisions in a problem, recognizing uncertainty in possible consequences but not eliminating it

EMV of an alternative with a .5 prob of making $500 is definitely $250, true or false

false, cannot determine EMV unless you know all possible returns. here you only know one of the possible outcomes

decomposition process of making decision after having analyzed parts of that decision, true or false

false, decomp process breaking decision into parts and analyzing alternatives and consequences, separate from decision making which takes place after process of decomp is complete)

event node is point at which decision maker must take action true or false

false, event node point at which something happens, decision node point at which decision maker must take action

alternates on branches of a decision tree must be mutually exclusive and equally likely, true or false

false, must be mutually exclusive and collectively exhaustive, not necessarily equally likely when prob is assigned by them

theres exactly one decision tree for each decision problem, true or false

false, some nodes can be combined if desired which would mean that more then 1 structure is possible

branches may be connected by circles or squares true or false

true

decision tree construsted from left to right with event and decision nodes in chronological order, true or false

true

do nothing is an alternative, true or false

true

expected monetary value/EMV is a # based on averaging

true, multiply probs by outcomes and adding them up

once a decision has been made and theres no additional consequences nor more decisions to be made this is indicated by...

vertical line at end of branch