Question 1

New information can be used to revise or update the prior probabilities so that the final decision is based on _____.

Accepted Answer

New information can help to refine the prior probabilities and lead to more accurate probabilities for the states of nature, which can then be used to inform the final decision. Input from a larger group, figures that were voted upon, or the opinion of a single individual (even the CEO) may not necessarily lead to more accurate probabilities.

Question 2

The probabilities of states of nature after revising the prior probabilities based on given indicator information are _____.

Accepted Answer

The probabilities of states of nature after revising the prior probabilities based on given indicator information are called the posterior probabilities. This is because they are updated probabilities that take into account new information, rather than the original prior probabilities that only consider what was known before any new information was introduced.

Question 3

A line or arc connecting the nodes of a decision tree is called a(n) _____.

Accepted Answer

A line or arc connecting the nodes of a decision tree is called a branch.

Question 4

Experts in problem solving agree that the first step in solving a complex problem is to _____.

Accepted Answer

Decomposing a complex problem into smaller sub-problems helps to make the problem more manageable and easier to solve. It allows for a clear understanding of the problem and helps to identify the key areas that need to be addressed. Acquiring software, assigning teams, or hiring consultants may be helpful in solving the problem, but they cannot be effective without first breaking down the problem into smaller parts.

Question 5

In computing an expected value (EV), the weights are _____.

Accepted Answer

The weights in computing an expected value (EV) are the state-of-nature probabilities, which represent the likelihood of each possible outcome occurring.

Question 6

A decision criterion that weights the payoff for each decision by its probability of occurrence is known as the _____.

Accepted Answer

The decision criterion that takes into account both the payoff and the probability of occurrence is known as the expected value criterion. By selecting the option with the highest expected value, the decision-maker can maximize their payoff on average. Therefore, the best choice is the expected value criterion (B).

Question 7

A tabular representation of the payoffs for a decision problem is a _____.

Accepted Answer

A payoff table is specifically designed to represent the payoffs for a decision problem in a tabular format, making it the best choice among the options given. A decision tree is a visual representation of decision options and their potential outcomes. A matrix is a more general term for any rectangular array of numbers or other data. A sequential matrix is not a commonly used term in decision analysis.

Question 8

Future events that cannot be controlled by the decision maker are called _____.

Accepted Answer

States of nature are future events that are beyond the control of the decision maker, such as market conditions or natural disasters. Indicators are measures used to predict or assess the likelihood of future events. Prior probabilities and posterior probabilities are probabilities assigned to events before and after new information is obtained, respectively, and are not necessarily tied to future events beyond the decision maker's control.

Question 9

An intersection or junction point of a decision tree is called a(n) _____.

Accepted Answer

A node is a point at which a decision must be made in a decision tree. It is also referred to as an intersection or junction point, but the most commonly used term is node.

Question 10

The probabilities for the states of nature must be _____.

Accepted Answer

The probabilities for the states of nature must be between 0 and 1 and they must add to 1, as this ensures that all possible outcomes are accounted for and the probability distribution is normalized.

Question 11

The expected opportunity loss of the best decision alternative is the _____.

Accepted Answer

The expected opportunity loss of the best decision alternative is the expected value of perfect information, which represents the cost of not having perfect information about the outcomes of the decision alternatives. Therefore, the best choice is to gather more information to reduce this cost and make a more informed decision.

Question 12

The expected value of information that would tell the decision maker exactly which state of nature is going to occur is the _____.

Accepted Answer

The expected value of information that would tell the decision maker exactly which state of nature is going to occur is the expected value of perfect information. This is because perfect information would eliminate all uncertainty and allow the decision maker to make the best decision possible.

Question 13

The probability of the states of nature, after use of Bayes' theorem to adjust the prior probabilities based on given indicator information, is called _____.

Accepted Answer

The answer of The probability of the states of nature,...

Question 14

The uncontrollable future events that can affect the outcome of a decision are known as _____.

Accepted Answer

The uncontrollable future events that can affect the outcome of a decision are known as states of nature. These are external factors that cannot be controlled by the decision-maker.

Question 15

For a decision alternative, the weighted average of the payoffs is known as _____.

Accepted Answer

The weighted average of the payoffs is known as the expected value. It is a key concept in decision making under uncertainty, where the decision maker has limited information about the future outcomes of each alternative. By calculating the expected value, the decision maker can compare different alternatives based on their potential payoffs and make an informed decision. The expected value does not take into account the costs or risks associated with each alternative, but it provides a useful benchmark for evaluating them.

Question 16

A tabular presentation of the expected gain from the various options open to a decision maker is called _____.

Accepted Answer

A payoff table presents the expected gain or loss from different options, making it easier for the decision maker to compare and select the best option. The other options (B, C, and D) refer to other decision-making tools and concepts, but do not directly provide a tabular presentation of expected gains.

Question 17

A graphic presentation of the expected gain from the various options open to the decision maker is called _____.

Accepted Answer

A decision tree is a graphical representation used in decision analysis to display the decisions and their possible consequences, including chance event outcomes, resource costs, and utility. It helps in choosing the best strategy by laying out the different options and their potential outcomes.

Question 18

The difference between the expected value of an optimal strategy based on sample information and the "best" expected value without any sample information is called the _____ information.

Accepted Answer

The expected value of sample information (EVSI) is the difference between the expected value of an optimal strategy based on sample information and the best expected value without any sample information.

Question 19

Prior probabilities are the probabilities of the states of nature _____.

Accepted Answer

Prior probabilities refer to the probabilities assigned to the different possible states of nature before any sample information is obtained. Option C correctly reflects this definition.

Question 20

The probability of both sample information and a particular state of nature occurring simultaneously is _____ probability.

Accepted Answer

Joint probability refers to the probability of both sample information and a particular state of nature occurring simultaneously.

Quiz 20: Decision Analysis