Question 1

The maximum likelihood criterion ignores the payoffs for states of nature other than the most likely one.

Accepted Answer

The maximum likelihood criterion only considers the probability of each state of nature, and chooses the one with the highest probability as the decision. It does not take into account the payoffs or costs associated with each state of nature.

Question 2

The Laplace criterion treats states of nature as being equally likely.

Accepted Answer

The Laplace criterion assumes that all states of nature are equally probable.

Question 3

Figure  &#10;The maximax strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low.

Accepted Answer

The maximax strategy is choosing the option with the maximum possible gain. In this case, buying has the potential for the highest gain as it has the highest potential return on investment.

Question 4

Determining the worst payoff for each alternative and choosing the alternative with the &#34;best worst&#34; is the criterion called:&#10;A)minimin.&#10;B)maximin.&#10;C)maximax.&#10;D)maximum likelihood.&#10;E)Bayes decision rule.

Accepted Answer

The maximin criterion involves looking at the worst possible outcome for each decision alternative and then choosing the alternative that has the best (or least bad) of these worst outcomes. This approach is particularly used in decision-making under uncertainty, where the decision-maker is conservative or risk-averse.

Question 5

The equally likely criterion assigns a probability of 0.5 to each state of nature.&#10;Multiple Choice Questions

Accepted Answer

The equally likely criterion assigns equal probabilities to all possible states of nature, not necessarily 0.5, unless there are exactly two states.

Question 6

The maximax approach is an optimistic strategy.

Accepted Answer

The maximax approach chooses the option with the highest possible payoff, assuming everything goes perfectly. This is an optimistic approach because it does not consider any possible negative outcomes or risks.

Question 7

The minimax regret criterion is a conservative criterion.

Accepted Answer

The minimax regret criterion is a conservative criterion because it focuses on minimizing the maximum possible regret, which means it is prioritizing the worst-case scenario. This may lead to conservative decision-making, as the decision-maker may choose a non-optimal option to avoid the possibility of significant regret in the worst-case scenario.

Question 8

Figure  &#10;The minimax regret strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low.

Accepted Answer

The minimax regret strategy involves selecting the option with the least maximum regret. In this case, if we choose to rent, the maximum regret we can have is 800. However, if we choose to lease or buy, the maximum regret can be much higher (up to 1600 or even 2000). Therefore, the best choice is to rent. The choices of "High" or "Low" do not make sense in this context as they are not options presented in the figure.

Question 9

The maximin criterion refers to:&#10;A)minimizing the maximum return.&#10;B)maximizing the minimum return.&#10;C)choosing the alternative with the highest payoff.&#10;D)choosing the alternative with the minimum payoff.&#10;E)None of the above.

Accepted Answer

The maximin criterion involves choosing the alternative with the highest minimum payoff, as this minimizes potential loss or risk. It is often used in decision-making under uncertainty, where the worst-case scenario is considered.

Question 10

Figure  &#10;The maximum likelihood strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low.

Accepted Answer

The answer of Figure  &#10;The maximum likelihood strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low....

Question 11

The maximin approach involves choosing the alternative that has the &#34;best worst&#34; payoff.

Accepted Answer

The answer of The maximin approach involves choosing the alternative...

Question 12

The maximin approach involves choosing the alternative with the highest payoff.

Accepted Answer

The answer of The maximin approach involves choosing the alternative...

Question 13

Determining the average payoff for each alternative and choosing the alternative with the highest average is the criterion called:&#10;A)minimin.&#10;B)maximin.&#10;C)equally likely.&#10;D)maximum likelihood.&#10;E)Bayes decision rule.

Accepted Answer

The answer of Determining the average payoff for each alternative...

Question 14

Figure  &#10;The equally likely strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low.

Accepted Answer

The answer of Figure  &#10;The equally likely strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low....

Question 15

Which of the following is not a criterion for decision making?&#10;A)EVPI.&#10;B)Maximin.&#10;C)Maximax.&#10;D)Equally likely.&#10;E)Maximum likelihood.

Accepted Answer

The answer of Which of the following is not a...

Question 16

Figure  &#10;The realism strategy with a pessimism-optimism index of 0.5 is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low.

Accepted Answer

The answer of Figure  &#10;The realism strategy with a...

Question 17

The maximin criterion is an optimistic criterion.

Accepted Answer

The answer of The maximin criterion is an optimistic criterion....

Question 18

An example of maximax decision making is a person buying lottery tickets in hopes of a very big payoff.

Accepted Answer

The answer of An example of maximax decision making is...

Question 19

A weakness of the maximin approach is that it loses some information.

Accepted Answer

The answer of A weakness of the maximin approach is...

Question 20

Figure  &#10;The maximin strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low.

Accepted Answer

The answer of Figure  &#10;The maximin strategy is:&#10;A)Buy.&#10;B)Rent.&#10;C)Lease.&#10;D)High.&#10;E)Low....

Question 21

Figure  &#10;The equally likely strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra large.

Accepted Answer

The answer of Figure  &#10;The equally likely strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium...

Question 22

Figure  &#10;The maximum likelihood strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra large.

Accepted Answer

The answer of Figure  &#10;The maximum likelihood strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium...

Question 23

Figure  &#10;The minimax regret strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra large.

Accepted Answer

The answer of Figure  &#10;The minimax regret strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium...

Question 24

Figure  &#10;The realism strategy with a pessimism-optimism index of 0.5 is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra large.

Accepted Answer

The answer of Figure  &#10;The realism strategy with a...

Question 25

Figure  &#10;The maximax strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra large.

Accepted Answer

The answer of Figure  &#10;The maximax strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra...

Question 26

Figure  &#10;The maximin strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra large.

Accepted Answer

The answer of Figure  &#10;The maximin strategy is:&#10;A)small.&#10;B)medium.&#10;C)medium large.&#10;D)large.&#10;E)extra...

Deck 10: Cd Supplement - Decision Analysis