Question 1

In a decision-making situation,events that may occur in the future are known as&#10;A)risks&#10;B)payoffs&#10;C)states of nature&#10;D)uncertainties

Accepted Answer

Events that may occur in the future are known as states of nature. Risks and uncertainties are factors that might affect the occurrence of these events, while payoffs are the outcomes or consequences associated with the different states of nature.

Question 2

A decision-making criterion that can be used for decision-making situations under conditions of risk is&#10;A)maximax&#10;B)maximin&#10;C)minimax regret&#10;D)expected value

Accepted Answer

The expected value criterion is appropriate when decision-making situations involve risk. This criterion involves calculating the expected value of each decision alternative and selecting the one with the highest expected value.

Question 3

A decision tree is used instead of a payoff table when&#10;A)there are more than 3 states of nature&#10;B)there are more than 3 decision payoffs&#10;C)the decisions situation encompasses and extended time period&#10;D)a sequence of decisions is required

Accepted Answer

A decision tree is used when a sequence of decisions is required. A payoff table can handle multiple states of nature and decision payoffs, but it does not account for the sequence of decisions that may be necessary in a decision-making situation. Therefore, option D is the best choice.

Question 4

In the Hurwicz criterion if the coefficient of optimism is 0.7 then the decision maker is&#10;A)completely optimistic&#10;B)completely pessimistic&#10;C)somewhat optimistic&#10;D)somewhat pessimistic

Accepted Answer

The Hurwicz criterion takes into account both optimism and pessimism, so a coefficient of 0.7 indicates that the decision maker is somewhat optimistic.

Question 5

The maximum amount that a decision maker would pay for perfect information is&#10;A)the expected value of the best decision&#10;B)the expected value given perfect information&#10;C)the expected value of perfect information&#10;D)the sum of the expected values for all decision alternative

Accepted Answer

The maximum amount a decision maker would pay for perfect information is the expected value of perfect information. This is the maximum amount because it represents the value of having all possible information available to make the best decision possible. The expected value of perfect information takes into account all possible outcomes and their respective probabilities in order to determine the value of having perfect information.

Deck 2: Supplement Operational Decision-Making Tools: Decision Analysis