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.
