Question 1

Although modeling provides valuable insight to decision makers,decision making remains a difficult task.Which of the following is not a primary cause for this difficulty discussed in the Decision Analysis chapter?
A)Uncertainty regarding the future.
B)Models provide decisions for the decision maker.
C)Conflicting values.
D)Conflicting objectives.

Accepted Answer

The statement "Models provide decisions for the decision maker" is incorrect. Models provide information and insights that can be used to help make a decision, but ultimately the decision maker must still make the decision themselves based on their own judgment and values. The primary difficulties in decision making discussed in the chapter include uncertainty about the future, conflicting objectives, and conflicting values.

Question 2

The amount of opportunity lost in making a decision is called
A)loss.
B)frustration.
C)negative profit.
D)regret.

Accepted Answer

Regret is the term used to describe the amount of opportunity lost when a decision is made, reflecting on what could have been gained from the best forgone option.

Question 3

Which of the following summarizes the final outcome for each decision alternative?
A)payoff matrix
B)outcome matrix
C)yield matrix
D)performance matrix

Accepted Answer

A payoff matrix summarizes the final outcomes for each decision alternative, showing the resulting payoffs from different actions under various states of the world.

Question 4

A course of action intended to solve a problem is called an)
A)alternative.
B)option.
C)decision.
D)criteria.

Accepted Answer

The answer of A course of action intended to solve...

Question 5

Every nonprobabilistic method has a weakness for decision making.Which of the following is incorrect regarding a method and its weakness?
A)The maximax method ignores potentially large losses.
B)The maximin method ignores potentially large payoffs.
C)The minimax regret method can lead to inconsistent decisions.
D)All of these are correct.

Accepted Answer

All of these statements are correct. The maximax method focuses solely on maximizing potential payoffs and ignores potential losses. The maximin method only focuses on minimizing potential losses and ignores potential payoffs. The minimax regret method can lead to inconsistent decisions because it relies on comparing regrets for each possible outcome, which can be subjective and difficult to quantify.

Question 6

The decision rule which determines the minimum payoff for each alternative and then selects the alternative associated with the largest minimum payoff is the
A)maximax decision rule.
B)maximin decision rule.
C)minimax regret decision rule.
D)minimin decision rule.

Accepted Answer

The maximin decision rule determines the minimum payoff for each alternative and then selects the alternative associated with the largest minimum payoff. This is a conservative decision rule that is useful when the decision maker is risk averse and wants to avoid the worst possible outcome. Therefore, the best choice is to use the maximin decision rule.

Question 7

Decision analysis supports all but one of the following goals.Which goal is not supported?
A)Help make good decisions.
B)Help ensure selection of good outcomes.
C)Analyze decision problems logically.
D)Incorporate problem uncertainty.

Accepted Answer

Decision analysis helps identify and evaluate various outcomes, but it does not ensure the selection of a good outcome. The ultimate responsibility for selecting a good outcome lies with the decision maker.

Question 8

The category of decision rules that contains the maximax decision rule is the
A)optimistic category.
B)non-probabilistic category.
C)probabilistic category.
D)optimality category.

Accepted Answer

The answer of The category of decision rules that contains...

Question 9

An)is a course of action intended to solve a problem.
A)decision
B)criteria
C)state of nature
D)alternative

Accepted Answer

An alternative refers to the different options or courses of action that can be taken to solve a problem. The other answer choices do not directly relate to solving a problem.

Question 10

The in a decision problem represent factors that are important to the decision maker.
A)payoffs
B)states of nature
C)criteria
D)alternatives

Accepted Answer

The criteria represent the factors that the decision maker values and uses to evaluate alternatives. Therefore, the best choice must take into account the criteria identified by the decision maker.

Question 11

The decision rule which determines the maximum payoff for each alternative and then selects the alternative associated with the largest payoff is the
A)maximax decision rule.
B)maximin decision rule.
C)minimax regret decision rule.
D)minimin decision rule.

Accepted Answer

The maximax decision rule selects the alternative associated with the largest possible payoff, which is the most optimistic decision rule.

Question 12

A payoff matrix depicts versus with payoffs for each intersection cell.
A)decision criteria;states of nature.
B)decision alternatives;potential outcomes.
C)decision alternatives;states of nature.
D)decision criteria;potential outcomes.

Accepted Answer

A payoff matrix typically depicts decision alternatives versus states of nature, with each cell in the matrix showing the payoff (or outcome) for a combination of a decision alternative and a state of nature.

Question 13

Decision Analysis techniques provide modeling techniques to help decision makers make decisions.Which of the following is not typically a benefit of decision analysis?
A)Incorporating uncertainty via probabilities.
B)Incorporating risk via utility theory functions.
C)Incorporating uncertainty via exponential distributions.
D)Structuring decision strategies via decision trees.

Accepted Answer

Exponential distributions are not typically used in decision analysis. However, incorporating uncertainty via probabilities, incorporating risk via utility theory functions, and structuring decision strategies via decision trees are all common benefits of decision analysis techniques.

Question 14

Which of the following is a goal of decision analysis?
A)Help individuals make good decisions.
B)Ensure decisions lead to good outcomes.
C)Avoiding decisions leading to bad outcomes.
D)Reduce the role of luck in a decision.

Accepted Answer

Decision analysis aims to provide a structured and systematic approach to decision-making, with the purpose of helping individuals make good decisions that are based on sound reasoning and analysis. While the other options may be considered desirable outcomes of decision analysis, they are not the primary goal.

Question 15

The decision rule which selects the alternative associated with the smallest maximum opportunity loss is the
A)maximax decision rule.
B)maximin decision rule.
C)minimax regret decision rule.
D)minimin decision rule.

Accepted Answer

The minimax regret decision rule seeks to minimize the maximum regret that could occur. This means that it is choosing the alternative with the smallest maximum opportunity loss, which is the same as choosing the alternative with the smallest maximum regret. The maximax decision rule selects the alternative with the largest possible payoff, the maximin decision rule selects the alternative with the largest minimum payoff, and the minimin decision rule selects the alternative with the smallest possible payoff.

Question 16

Which decision rule pessimistically assumes that nature will always be "against us" regardless of what decision we make?
A)maximax decision rule.
B)maximin decision rule.
C)minimax regret decision rule.
D)minimin decision rule.

Accepted Answer

The maximin decision rule considers the worst possible outcome (maximum loss) of each decision alternative and chooses the alternative with the highest minimum payoff. This rule is pessimistic because it assumes that nature will always be against us, and it aims to minimize the regret or potential loss we may experience. The maximax decision rule, on the other hand, is optimistic and assumes that nature will always be in our favor, so it aims to maximize the potential payoff. The minimax regret decision rule considers the possible regret of each decision alternative and chooses the alternative with the lowest maximum regret. The minimin decision rule considers the best possible outcome (minimum gain) of each decision alternative and chooses the alternative with the lowest maximum loss. Therefore, B is the best choice for this question.

Question 17

The correspond to future events that are not under the control of the decision maker.
A)payoffs
B)states of nature
C)criteria
D)alternatives

Accepted Answer

States of nature refer to future events or conditions that are beyond the control of the decision maker, such as weather conditions, economic changes, or actions by competitors.

Question 18

Exhibit 14.1
The following questions are based on the information below.
An investor is considering 4 investments,A,B,C and leaving his money in the bank.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the decision problem.
 
-Refer to Exhibit 14.1.What decision should be made according to the maximax decision rule?
A)A
B)B
C)C
D)Bank

Accepted Answer

According to the maximax decision rule, the investor should choose the option with the highest possible payoff in the best economic climate. In this case, option A has the highest payoff of $240,000 in the expansion economic climate. Therefore, the best decision based on maximax rule is to choose option A.

Question 19

How are states of nature assigned probabilities?
A)Use historical data.
B)Use best judgements.
C)Use interview results.
D)All of these.

Accepted Answer

Probabilities for states of nature can be assigned using historical data, best judgments, and interview results, making all options valid methods.

Question 20

Which decision rule optimistically assumes that nature will always be "on our side" regardless of what decision we make?
A)maximax decision rule.
B)maximin decision rule.
C)minimax regret decision rule.
D)minimin decision rule.

Accepted Answer

The maximax decision rule assumes that nature will always favor the best possible outcome for us and thus, we should choose the alternative that maximizes the maximum possible gain. It is an optimistic approach that considers the best-case scenario without considering any potential risks or uncertainties.

Quiz 14: Decision Analysis

Although modeling provides valuable insight to decision makers,decision making remains a difficult task.Which of the following is not a primary cause for this difficulty discussed in the Decision Analysis chapter?

The amount of opportunity lost in making a decision is called

Which of the following summarizes the final outcome for each decision alternative?

A course of action intended to solve a problem is called an)

Every nonprobabilistic method has a weakness for decision making.Which of the following is incorrect regarding a method and its weakness?

The decision rule which determines the minimum payoff for each alternative and then selects the alternative associated with the largest minimum payoff is the

Decision analysis supports all but one of the following goals.Which goal is not supported?

The category of decision rules that contains the maximax decision rule is the

An) is a course of action intended to solve a problem.

The in a decision problem represent factors that are important to the decision maker.

The decision rule which determines the maximum payoff for each alternative and then selects the alternative associated with the largest payoff is the

A payoff matrix depicts versus with payoffs for each intersection cell.

Decision Analysis techniques provide modeling techniques to help decision makers make decisions.Which of the following is not typically a benefit of decision analysis?

Which of the following is a goal of decision analysis?

The decision rule which selects the alternative associated with the smallest maximum opportunity loss is the

Which decision rule pessimistically assumes that nature will always be "against us" regardless of what decision we make?

The correspond to future events that are not under the control of the decision maker.

How are states of nature assigned probabilities?

Which decision rule optimistically assumes that nature will always be "on our side" regardless of what decision we make?