MCQ Decision theory - Notes PDF

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Decision theory always guarantees optimal solution. a. True b. False Decision theory provides a rational and logical way of making decisions. a. True b. False In pruning (evaluating) a decision tree, you write the expected payoff at a random outcome node inside the circle or square representing that...

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1. Decision theory always guarantees optimal solution. a. True b. False 2. Decision theory provides a rational and logical way of making decisions. a. True b. False 3. In pruning (evaluating) a decision tree, you write the expected payoff at a random outcome node inside the circle or square representing that node. a. True b. False 4. Which of the following is not a part of decision tree problem specification. a. A list of alternatives. b. A list of possible states of nature c. Expected value of perfect information. d. Payoffs associated with alternative/state of nature combination. 5. If a decision theory problem has 3 decision alternatives and 4 states of nature, the number of payoffs in that problem will be a. 3 b. 4 c. 12 d. 64 6. In a decision theory problem under complete uncertainty, which one of the following approaches will not be possible? a. Expected monetary value. b. Maximin c. Minimax d. Hurwicz 7. Projected payoff corresponding to various levels of business expansion and economic conditions faced by Ramcast Cable Inc. is given in the table below. Using Hurwicz criterion with α=0.7, identify the correct decision for Ramcast Cable Inc.

d1 d2 c. d3 d. d4 8. Expected payoff corresponding to various levels of business expansion and economic conditions faced by Ramcast Cable Inc. is given in the table below. The probabilities of a. b.

the events are also given. Using expected monetary value criterion, identify the correct decision for Ramcast Cable Inc.

d1 b. d2 c. d3 d. d4 9. Which of the following is (are) types of decision-making environments? a. Decision making under uncertainty b. Decision making under certainty c. Decision making under risk d. None of the above e. All of the above 10. A good decision always implies that we a. will obtain the best final results. b. have used appropriate quantitative analysis. c. have considered all alternatives. d. have based the decision on all available appropriate information. e. have followed a logical process. 11. All of the following are steps in the decision-making process EXCEPT: a. Define the problem b. List alternatives c. Identify possible outcomes d. List payoffs e. Compute the posterior probabilities 12. The equally likely decision criterion is also known as a. Bayes'. b. Laplace. c. Minimax d. Hurwicz. e. None of the above a.

13. Any problem that can be represented in a decision table can also be graphically illustrated in a: a. utility curve. b. Bayes' diagram. c. decision tree d. Hurwicz diagram e. None of the above 14. The graph that plots the utility value versus monetary value is called: a. Trade-off graph b. decision tree graph c. Laplace curve d. benefit curve e. utility curve 15. Opportunity loss refers to a. the expected value of a bad decision. b. the expected loss from a bad decision. c. the difference between the actual payoff and the optimal payoff. d. the regret from not having made a decision e. none of the above 16. The criteria of Expected Monetary Value is used for making decisions under a. Certainty b. Uncertainty c. Risk d. All of the above e. None of the above 17. The maximin criteria is a(n) __________ criteria. a. Optimistic b. Neutral c. Pessimistic d. can be any one of the above depending on the problem e. none of the above 18. Which of the following might be viewed as an "optimistic" decision criterion? a. Hurwicz criterion b. Maximin c. Maximax d. Minimax e. none of the above 19. A key reason for poor decisions is failure to identify the problem. a. True b. False 20. Optimization for an organization may mean suboptimization for some departments. a. True b. False 21. A decision environment of uncertainty has probabilities assigned to each state of nature. a. True b. False 22. If a decision maker is using a maximax approach, the decision maker would choose the alternative that has the best possible payoff. a. True b. False

23. If a decision maker is using a maximin approach, the decision maker would choose the alternative that has the best of the worst possible payoffs. a. True b. False 24. A decision maker who uses the minimax regret approach is focusing on avoiding the "If only I had chosen…" effect. a. True b. False 25. Expected monetary value is the criterion that is useful for decision making under uncertainty. a. True b. False 26. The expected monetary value can be computed using a decision tree diagram a. True b. False 27. Sensitivity analysis is sometimes used to determine the expected value of perfect information. a. True b. False 28. The range of probability for which an alternative has the best expected value can be determined using a decision tree. a. True b. False 29. The EVPI is equal to the expected financial value of the regrets for the optimal decision under risk. a. True b. False 30. Which approach would be used by an optimistic (or desperate) decision maker? a. Maximin b. Maximax c. Minimax Regret d. EMV 31. Which approach would be used by a pessimistic decision maker? a. Maximin b. Maximax c. Minimax Regret d. EMV 32. Which approach requires having probabilities for the states of nature? a. Maximin b. Maximax c. Minimax Regret d. EMV 33.

The maximax choice would be: a. Buy b. Rent c. Lease

34.

The maximin choice would be: a. Buy b. Rent c. Lease 35.

The minimax regret choice would be: a. Buy b. Rent c. Lease 36.

If the probability of Business Grows is 0.40, which alternative would be chosen using EMV? a. Buy b. Rent c. Lease 37.

If the probability of Business Grows is 0.40, what is the EVPI? a. 57 b. 44 c. 42 d. 36...