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Exam 20: An Introduction to Decision Theory

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Question 31

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A decision maker usually has a choice among several possible alternative acts. For each alternative act,there are many possible results called states of occurrence.

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Question 32

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A maximin strategy will always choose the act or alternative that ________.

A) maximizes the expected monetary value
B) minimizes the maximum regret or opportunity loss
C) maximizes the potential payoff regardless of the state of nature
D) guarantees a payoff for any state of nature

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Question 33

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The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the payoff value for the purchase of eight watermelons when the demand is for seven watermelons?

In decision making,if there are one or more unknown factors,then the decision is made under conditions of uncertainty.

Optimists advocate a maximax strategy.

Maximizers advocate a maximin strategy.

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the payoff value for the purchase of seven watermelons when the demand is for seven or more watermelons?

Besides a payoff table,the information for decision analysis can be organized using a ________.

Applying probabilities to a payoff table results in ________.

A decision maker's course of action results in a consequence or payoff.

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the payoff value for the purchase of eight watermelons when the demand is for eight or more watermelons?

The national sales manager for "I colored this" (ICT) T-shirts provides all salespersons with the payoff table shown next,giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown. What is the value of perfect information if the expected payoff is $180?

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the opportunity loss for purchasing eight watermelons when the demand is for nine watermelons?

The national sales manager for "I colored this" (ICT) T-shirts provides all salespersons with the payoff table shown next,giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown. What is the expected payoff for purchasing four dozen T-shirts?

The national sales manager for "I colored this" (ICT) T-shirts provides all salespersons with the following opportunity loss table showing the potential lost profit for each purchase decision or act from one to four dozen T-shirts. The probability of demand for each state of nature is also shown. What is the expected opportunity loss of purchasing one dozen T-shirts?

When the payoffs are profits,the maximin strategy selects the alternative or act with the maximum gain.

Which of the following is not a component of the decision-making process?

Sensitivity analysis examines the effects that changes in the probabilities for the states of nature have on the expected values of the alternatives or acts,and the corresponding decisions.

A person is trying to decide if he or she should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner,the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature) ,the person finds that the probability of winning is 0.001. Based on this information,the following payoff table can be constructed: What is the probability of losing $2.00?

The national sales manager for "I colored this" (ICT) T-shirts provides all salespersons with the payoff table shown next,giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown. What would be the best decision if the maximax strategy is used?