Deck 19: Decision Making

Question 1

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the expected monetary value (EMV)for A1 is

A)3.
B)4.
C)6.5.
D)8.

Answer 1

D

Question 2

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.2 and S2 is 0.8,then the expected monetary value of A1 is

A)2.4.
B)5.6.
C)8.
D)16.

Answer 2

B

Question 3

A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year.If the expanded advertising campaign is successful,the company expects sales to increase by $1.6 million next year.If the advertising campaign fails,the company expects sales to increase by only $400,000 next year.If the advertising budget is not increased,the company expects sales to increase by $200,000.Identify the outcomes in this decision-making problem.

A)Two choices: (1)increase the budget and (2)do not increase the budget.
B)Two possibilities: (1)campaign is successful and (2)campaign is not successful.
C)Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations.
D)The increase in sales dollars next year.

Answer 3

C

Question 4

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,the opportunity loss for A3 when S2 occurs is

A)0.
B)4.
C)5.
D)6.

Question 5

A tabular presentation that shows the outcome for each decision alternative under the various states of nature is called

A)a payback period matrix.
B)a decision matrix.
C)a decision tree.
D)a payoff table.

Question 6

A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year.If the expanded advertising campaign is successful,the company expects sales to increase by $1.6 million next year.If the advertising campaign fails,the company expects sales to increase by only $400,000 next year.If the advertising budget is not increased,the company expects sales to increase by $200,000.Identify the events in this decision-making problem.

A)Two choices: (1)increase the budget and (2)do not increase the budget.
B)Two possibilities: (1)campaign is successful and (2)campaign is not successful.
C)Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations.
D)The increase in sales dollars next year.

Question 7

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,the opportunity loss for A2 when S1 occurs is

A)-2.
B)0.
C)5.
D)14.

Question 8

A medical doctor is involved in a $1 million malpractice suit.He can either settle out of court for $250,000 or go to court.If he goes to court and loses,he must pay $825,000 plus $175,000 in court costs.If he wins in court the plaintiffs pay the court costs.Identify the actions of this decision-making problem.

A)Two choices: (1)go to court and (2)settle out of court.
B)Two possibilities: (1)win the case in court and (2)lose the case in court.
C)Four consequences resulting from Go/Settle and Win/Lose combinations.
D)The amount of money paid by the doctor.

Question 9

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the expected monetary value (EMV)for A2 is

A)3.
B)4.
C)6.5.
D)8.

Question 10

The difference between expected payoff under certainty and expected value of the best act without certainty is the

A)expected monetary value.
B)expected net present value.
C)expected value of perfect information.
D)expected rate of return.

Question 11

A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year.If the expanded advertising campaign is successful,the company expects sales to increase by $1.6 million next year.If the advertising campaign fails,the company expects sales to increase by only $400,000 next year.If the advertising budget is not increased,the company expects sales to increase by $200,000.Identify the actions in this decision-making problem.

A)Two choices: (1)increase the budget and (2)do not increase the budget.
B)Two possibilities: (1)campaign is successful and (2)campaign is not successful.
C)Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations.
D)The increase in sales dollars next year.

Question 12

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,what is the optimal alternative using EMV?

A)A1
B)A2
C)A3
D)It cannot be determined.

Question 13

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.4,then the probability of S2 is

A)0.4.
B)0.5.
C)0.6.
D)1.0.

Question 14

A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year.If the expanded advertising campaign is successful,the company expects sales to increase by $1.6 million next year.If the advertising campaign fails,the company expects sales to increase by only $400,000 next year.If the advertising budget is not increased,the company expects sales to increase by $200,000.Identify the payoffs in this decision-making problem.

A)Two choices: (1)increase the budget and (2)do not increase the budget.
B)Two possibilities: (1)campaign is successful and (2)campaign is not successful.
C)Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations.
D)The increase in sales dollars next year.

Question 15

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.2,what is the optimal alternative using EOL?

A)A1
B)A2
C)A3
D)It cannot be determined.

Question 16

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the expected opportunity loss (EOL)for A3 is

A)3.
B)4.5.
C)7.
D)8.

Question 17

A medical doctor is involved in a $1 million malpractice suit.He can either settle out of court for $250,000 or go to court.If he goes to court and loses,he must pay $825,000 plus $175,000 in court costs.If he wins in court the plaintiffs pay the court costs.Identify the states of nature of this decision-making problem.

A)Two choices: (1)go to court and (2)settle out of court.
B)Two possibilities: (1)win the case in court and (2)lose the case in court.
C)Four consequences resulting from Go/Settle and Win/Lose combinations.
D)The amount of money paid by the doctor.

Question 18

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.2 and S2 is 0.8,then the expected opportunity loss (EOL)for A1 is

A)0.
B)1.2.
C)4.8.
D)5.6.

Question 19

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the expected opportunity loss (EOL)for A1 is

A)3.
B)4.5.
C)7.
D)8.

Question 20

A medical doctor is involved in a $1 million malpractice suit.He can either settle out of court for $250,000 or go to court.If he goes to court and loses,he must pay $825,000 plus $175,000 in court costs.If he wins in court the plaintiffs pay the court costs.Identify the outcomes of this decision-making problem.

A)Two choices: (1)go to court and (2)settle out of court.
B)Two possibilities: (1)win the case in court and (2)lose the case in court.
C)Four consequences resulting from Go/Settle and Win/Lose combinations.
D)The amount of money paid by the doctor.

Question 21

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.The number of states of nature for the payoff table is

A)2.
B)3.
C)4.
D)It cannot be determined.

Question 22

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the EOL for buying 200 dozen roses is

A)$700.
B)$900.
C)$1,500.
D)$1,600.

Question 23

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.The payoff for buying 200 dozen roses and selling 100 dozen roses at the full price is

A)$2,000.
B)$1,000.
C)$500.
D)-$500.

Question 24

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the return to risk ratio for A3 is

A)0.667.
B)1.5.
C)2.
D)4.333.

Question 25

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal EMV for buying roses is

A)$700.
B)$900.
C)$1,700.
D)$1,900.

Question 26

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.The opportunity loss for buying 200 dozen roses and selling 100 dozen roses at the full price is

A)$1,000.
B)$500.
C)-$500.
D)-$2,000.

Question 27

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.If the probability of selling 100 dozen roses is 0.2 and 200 dozen roses is 0.5,then the probability of selling 400 dozen roses is

A)0.7.
B)0.5.
C)0.3.
D)0.2.

Question 28

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,what is the best action using the maximax criterion?

A)Action A1
B)Action A2
C)Action A3
D)It cannot be determined.

Question 29

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,what is the best action using the maximin criterion?

A)Action A1
B)Action A2
C)Action A3
D)It cannot be determined.

Question 30

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the EVPI for the payoff table is

A)-3.
B)3.
C)8.
D)11.

Question 31

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the return to risk ratio for A1 is

A)0.667.
B)1.5.
C)2.
D)4.333.

Question 32

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the expected profit under certainty (EPUC )is

A)3.
B)5.
C)8.
D)11.

Question 33

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the EMV for buying 200 dozen roses is

A)$4,500.
B)$2,500.
C)$1,700.
D)$1,000.

Question 34

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.The number of alternatives for the payoff table is

A)2.
B)3.
C)4.
D)It cannot be determined.

Question 35

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal EOL for buying roses is

A)$700.
B)$900.
C)$1,500.
D)$1,600.

Question 36

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.The payoff for buying and selling 400 dozen roses at the full price is

A)$12,000.
B)$6,000.
C)$4,000.
D)It cannot be determined.

Question 37

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal alternative using EMV for selling roses is to buy ________ dozen roses.

A)100
B)200
C)400
D)600

Question 38

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the coefficient of variation for A2 is

A)0.231.
B)0.5.
C)1.5.
D)2.

Question 39

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Referring to Table 19-1,if the probability of S1 is 0.5,then the coefficient of variation for A1 is

A)0.231.
B)0.5.
C)1.5.
D)2.

Question 40

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.The opportunity loss for buying 400 dozen roses and selling 200 dozen roses at the full price is

A)-$2,000.
B)$1,000.
C)$500.
D)$0.

Question 41

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,what is the action with the preferable return to risk ratio?

A)Action A
B)Action B
C)Either Action A or Action B
D)It cannot be determined.

Question 42

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,the EOL for Action A is

A)0.
B)100.
C)200.
D)300.

Question 43

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
For a potential investment of $5,000,a portfolio has an EMV of $1,000 and a standard deviation of $100.What is the rate of return?

A)5%
B)10%
C)20%
D)50%

Question 44

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,what is the action with the preferable coefficient of variation?

A)Action A
B)Action B
C)Either Action A or Action B
D)It cannot be determined.

Question 45

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,what is the best action using the maximax criterion?

A)Action A
B)Action B
C)Either Action A or Action B
D)It cannot be determined.

Question 46

TABLE 19-3
The following information is from 2 investment opportunities.
Referring to Table 19-3,which investment has the optimal coefficient of variation?

A)Investment A
B)Investment B
C)The investments are equal.
D)It cannot be determined.

Question 47

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
For a potential investment of $5,000,a portfolio has an EMV of $1,000 and a standard deviation of $100.What is the coefficient of variation?

A)10%
B)20%
C)50%
D)100%

Question 48

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,what is the optimal action using the EOL criterion?

A)Action A
B)Action B
C)Either Action A or Action B
D)It cannot be determined.

Question 49

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,the EVPI is

A)0.
B)300.
C)400.
D)600.

Question 50

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,the coefficient of variation for Action A is

A)12.8%.
B)33.3%.
C)133.33%.
D)333.3%.

Question 51

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,the return to risk ratio for Action B is

A)0.167.
B)3.0.
C)6.0.
D)9.0.

Question 52

TABLE 19-3
The following information is from 2 investment opportunities.
Referring to Table 19-3,which investment has the optimal return to risk ratio?

A)Investment A
B)Investment B
C)The investments are equal.
D)It cannot be determined.

Question 53

TABLE 19-3
The following information is from 2 investment opportunities.
Referring to Table 19-3,what is the coefficient of variation for investment A?

A)90.0%
B)11.1%
C)8.3%
D)5.0%

Question 54

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,the expected profit under certainty (EPUC )is

A)0.
B)300.
C)500.
D)600.

Question 55

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
For a potential investment of $5,000,a portfolio has an EMV of $1,000 and a standard deviation of $100.The return to risk ratio is

A)50.
B)20.
C)10.
D)5.

Question 56

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,what is the best action using the maximin criterion?

A)Action A
B)Action B
C)Either Action A or Action B
D)It cannot be determined.

Question 57

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the EVPI for buying roses is

A)$700.
B)$1,500.
C)$1,900.
D)$2,600.

Question 58

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,the EMV for Action A is

A)$300.
B)$550.
C)$600.
D)$700.

Question 59

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
Referring to Table 19-2,what is the optimal action using the EMV criterion?

A)Action A
B)Action B
C)Either Action A or Action B
D)It cannot be determined.

Question 60

TABLE 19-2
The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5.
The minimum expected opportunity loss is also equal to

A)expected profit under certainty.
B)expected value of perfect information.
C)coefficient of variation.
D)expected value under certainty minus the expected monetary value of the worst alternative.

Question 61

In a local cellular phone area,company A accounts for 60% of the cellular phone market,while company B accounts for the remaining 40% of the market.Of the cellular calls made with company A,1% of the calls will have some sort of interference,while 2% of the cellular calls with company B will have interference.If a cellular call is selected at random,the probability that it will have interference is

A)0.014.
B)0.028.
C)0.14.
D)0.986.

Question 62

TABLE 19-4
A stock portfolio has the following returns under the market conditions listed below.
Referring to Table 19-4,what is the return to risk ratio?

A)0.64
B)1.08
C)1.18
D)2.00

Question 63

________ is a procedure for revising probabilities based upon additional information.

A)Utility theory
B)Bernoulli's theorem
C)Beckman's theorem
D)Bayes' theorem

Question 64

True or False: Opportunity loss is the difference between the lowest profit for an event and the actual profit obtained for an action taken.

Question 65

The ________ curve represents the expected monetary value approach.

A)risk averter's
B)risk taker's
C)risk neutral
D)Bernoulli

Question 66

Look at the utility function graphed below and select the type of decision-maker that corresponds to the graph.

A)Risk averter
B)Risk neutral
C)Risk taker
D)Risk player

Question 67

True or False: To calculate expected profit under certainty,you need to have perfect information about which event will occur.

Question 68

TABLE 19-4
A stock portfolio has the following returns under the market conditions listed below.
Referring to Table 19-4,what is the EMV?

A)$180
B)$130
C)$90
D)$80

Question 69

TABLE 19-4
A stock portfolio has the following returns under the market conditions listed below.
Referring to Table 19-4,what is the standard deviation?

A)4,890
B)4,840
C)124.9
D)69.6

Question 70

At Eastern University,60% of the students are from suburban areas,30% are from rural areas,and 10% are from urban areas.Of the students from the suburban areas,60% are nonbusiness majors.Of the students from the rural areas,70% are nonbusiness majors.Of the students from the urban areas,90% are nonbusiness majors.The probability that a randomly selected student is a business major is

A)0.66.
B)0.54.
C)0.44.
D)0.34.

Question 71

True or False: Removal of uncertainty from a decision-making problem leads to a case referred to as perfect information.

Question 72

Look at the utility function graphed below and select the type of decision maker that corresponds to the graph.

A)Risk averter
B)Risk neutral
C)Risk taker
D)Risk player

Question 73

At Eastern University,60% of the students are from suburban areas,30% are from rural areas,and 10% are from urban areas.Of the students from the suburban areas,60% are nonbusiness majors.Of the students from the rural areas,70% are nonbusiness majors.Of the students from the urban areas,90% are nonbusiness majors.If a randomly selected student is not a business major,the probability that the student is from the urban area is

A)0.136.
B)0.214.
C)0.666.
D)0.706.

Question 74

TABLE 19-4
A stock portfolio has the following returns under the market conditions listed below.
Referring to Table 19-4,what is the coefficient of variation?

A)88.8%
B)90.3%
C)100%
D)156.1%

Question 75

The risk seeker's curve represents the utility of one who enjoys taking risks.Therefore,the slope of the utility curve becomes ________ for large dollar amounts.

A)smaller
B)stable
C)larger
D)uncertain

Question 76

TABLE 19-3
The following information is from 2 investment opportunities.
Referring to Table 19-3,what is the return to risk ratio for Investment B?

A)8
B)10
C)12
D)24

Question 77

Look at the utility function graphed below and select the type of decision maker that corresponds to the graph.

A)Risk averter
B)Risk neutral
C)Risk taker
D)Risk player

Question 78

In a local cellular phone area,company A accounts for 60% of the cellular phone market,while company B accounts for the remaining 40% of the market.Of the cellular calls made with company A,1% of the calls will have some sort of interference,while 2% of the cellular calls with company B will have interference.If a cellular call is selected at random and has interference,what is the probability that it was with company A?

A)0.071
B)0.429
C)0.571
D)It cannot be determined.

Question 79

The curve for the ________ will show a rapid increase in utility for initial amounts of money followed by a gradual leveling off for increasing dollar amounts.

A)risk taker
B)risk averter
C)risk neutral
D)profit seeker

Question 80

In a local cellular phone area,company A accounts for 60% of the cellular phone market,while company B accounts for the remaining 40% of the market.Of the cellular calls made with company A,1% of the calls will have some sort of interference,while 2% of the cellular calls with company B will have interference.If a cellular call is selected at random,the probability that it will not have interference is

A)0.014.
B)0.028.
C)0.14.
D)0.986.