TOPIC 4. TRUE/FALSE

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One limitation of a scoring model is that it uses arbitrary weights that do not necessarily reflect the preferences of the individual decision maker.

FALSE

Quantitative forecasting methods can be used when past information about the variable being forecast is unavailable.

FALSE

Target values will never be met precisely in a goal programming problem.

FALSE

The decision alternative with the best expected monetary value will always be the most desirable decision.

FALSE

The expected utility is the utility of the expected monetary value.

FALSE

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

FALSE

The expected value of an alternative can never be negative.

FALSE

The expected value of sample information can never be less than the expected value of perfect information.

FALSE

Trend in a time series must always be linear.

FALSE

With fewer periods in a moving average, it will take longer to adjust to a new level of data values.

FALSE

Square nodes in a decision tree indicate that a decision must be made.

TRUE

States of nature should be defined so that one and only one will actually occur.

TRUE

The exponential smoothing forecast for any period is a weighted average of all the previous actual values for the time series.

TRUE

The goal programming approach can be used when an analyst is confronted with an infeasible solution to an ordinary linear program.

TRUE

The mean squared error is obtained by computing the average of the squared forecast errors.

TRUE

The primary value of decision trees is that they provide a useful way to organize how operations managers think about complex multiphase decisions.

TRUE

The priority matrix shows the priority for each item on each criterion.

TRUE

The utility function for a risk avoider typically shows a diminishing marginal return for money.

TRUE

Time series data can exhibit seasonal patterns of less than one month in duration.

TRUE

To solve a goal programming problem with preemptive priorities, successive linear programming programs, with an adjustment to the objective function and an additional constraint, must be solved.

TRUE

Under the minimax regret approach to decision making, EVPI equals the expected regret that is associated with the minimax decision.

TRUE

Utility is the term for a measure of the total worth or relative desirability of a particular outcome.

TRUE

When forecasting, if a greater number of past values are considered relevant, then we generally opt for a larger value of k.

TRUE

When monetary value is not the sole measure of the true worth of the outcome to the decision maker, monetary value should be replaced by utility.

TRUE

When the expected utility approach and the expected value approach applied to monetary payoffs result in the same action, these are characteristics generally associated with a risk-neutral decision maker.

TRUE

When the expected value approach is used to select a decision alternative, the payoff that actually occurs will usually have a value different from the expected value.

TRUE

When using a moving average of order k to forecast, a small value for k is preferred if only the most recent values of the time series are considered relevant.

TRUE

In situations where you need to compare forecasting methods for different time periods, relative measures such as mean absolute error (MAE) are preferred.

FALSE

Objectives in multicriteria problems seldom conflict.

FALSE

A four-period moving average forecast for period 10 would be found by averaging the values from periods 10, 9, 8, and 7.

FALSE

A problem involving only one priority level is not considered a goal programming problem.

FALSE

All quarterly time series contain seasonality.

FALSE

Any recurring sequence of points above and below the trend line lasting less than one year can be attributed to the cyclical component of the time series.

FALSE

Decision alternatives are structured so that several could occur simultaneously.

FALSE

In a goal programming model, there can only be one goal at each priority level.

FALSE

A consistency ratio greater than 0.10 indicates inconsistency in the pairwise comparisons.

TRUE

A decision strategy is a sequence of decisions and chance outcomes where the decisions chosen depend on the yet-to-be-determined outcomes of chance events.

TRUE

A high efficiency rating indicates that the sample information is almost as good as perfect information.

TRUE

A risk avoider is a decision maker who would choose a guaranteed payoff over a lottery with a superior expected payoff.

TRUE

A sequence of observations on a variable measured at successive points in time or over successive periods of time is known as a time series.

TRUE

AHP allows a decision maker to express personal preferences about the various aspects of a multicriteria problem.

TRUE

After all probabilities and payoffs are placed on a decision tree, the decision maker calculates expected values at state-of-nature nodes and makes selections at decision nodes.

TRUE

An item's priority reveals how it compares to its competitors on a specific criterion.

TRUE

As long as the monetary value of payoffs stays within a range that the decision maker considers reasonable, selecting the decision alternative with the best expected value usually leads to selection of the most preferred decision.

TRUE

Circular nodes in a decision tree are considered chance nodes.

TRUE

EVPI is always greater than or equal to EVSI.

TRUE

For a chance node, the expected value is the weighted average of the payoffs, where the weights are the state-of-nature probabilities.

TRUE

For a scoring model, the decision maker evaluates each decision alternative by considering the weight or importance of each criterion.

TRUE

For a time series with relatively little random variability, we should use larger values of the smoothing constant to provide the advantage of allowing the forecasts to react more quickly to changing conditions.

TRUE

Given two decision makers, one a risk taker and the other a risk avoider, the risk avoider will show a diminishing marginal return for money.

TRUE

Goal equations consist of a function that defines goal achievement and deviation variables that measure the distance from the target.

TRUE

Goal priorities are referred to as preemptive priorities because the satisfaction of a higher level goal cannot be traded for the satisfaction of a lower level goal.

TRUE

If a problem has multiple goals at different priority levels, then it is rare that all the goals will be achieved with existing resources

TRUE

If a time series has a significant trend pattern, then one should not use a moving average to forecast.

TRUE

If the random variability in a time series is great, a small value of the smoothing constant is preferred so that we do not overreact and adjust our forecasts too quickly.

TRUE

If we focus upon the historical data, or past values of the variable to be forecast, we refer to this as a time series method of forecasting.

TRUE

In goal programming, deviation variables allow for the possibility of not meeting the target value exactly.

TRUE

In order to use moving averages to forecast a time series, the first step is to select the order k, the number of time series values to be included in the moving average.

TRUE

Maximizing the expected payoff and minimizing the expected opportunity loss result in the same recommended decision.

TRUE

Qualitative forecasting methods are appropriate when historical data on the variable being forecast are either unavailable or not applicable.

TRUE

Regret is the difference between the payoff associated with a particular decision alternative and the payoff associated with the decision that would yield the most desirable payoff for a given state of nature.

TRUE

Requiring a decision maker to provide judgments about the relative importance of each criterion and then specifying a preference for each decision alternative using each criterion is the purpose of the analytic hierarchy process.

TRUE

Risk analysis helps the decision maker recognize the difference between the expected value of a decision alternative and the payoff that may actually occur.

TRUE

Sample information with an efficiency rating of 100% is perfect information.

TRUE

Smoothing methods are more appropriate for a stable time series than when significant trend or seasonal patterns are present.

TRUE


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