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Exam 19: Decision Analysis

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Question 21

Multiple Choice

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Below you are given a revenue payoff table involving three decision alternatives and two states of nature. ​ The probability of the occurrence of state of nature s₁ is .4. The recommended decision based on the expected value criterion is

A) A.
B) B.
C) C.
D) Both B and C are recommended.

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Question 22

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Below you are given a profit payoff table involving two decision alternatives and three states of nature. ​ The probability that s₁ will occur is .2; the probability that s₂ will occur is .6. The recommended decision based on the expected value criterion is

A) A.
B) B.
C) Both A and B are optimal.
D) A third alternative is required for an optimal solution.

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Question 23

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The process of revising prior probabilities to create posterior probabilities based on sample information requires using

The probability of a state of nature that results after using Bayes' theorem to adjust the prior probability based on sample information is called _____ probability.

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

Below you are given an income payoff table involving three decision alternatives and two states of nature. ​ The probability of the occurrence of s₁ = .3. The recommended decision alternative based on the expected value is

Below you are given an income payoff table involving three decision alternatives and two states of nature. ​ The probability of the occurrence of s₁ = .3. The expected value of the best alternative is

Below you are given a revenue payoff table involving three decision alternatives and two states of nature. ​ The probability of the occurrence of state of nature s₁ is .4. The expected value of the best alternative equals

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

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

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

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

Below you are given a profit payoff table involving three decision alternatives and three states of nature. ​ The probability of occurrence of s₁ is .1 and the probability of occurrence of s₂ is .3. The recommended decision alternative based on the expected value is

Below you are given an income payoff table involving three decision alternatives and two states of nature. ​ The probability of the occurrence of s₁ = .3. The expected value of perfect information is

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.

Below you are given a profit payoff table involving three decision alternatives and two states of nature. ​ The probability of occurrence of s₁ = .2. The expected value of perfect information is

Below you are given a profit payoff table involving three decision alternatives and two states of nature. ​ The probability of occurrence of s₁ = .2. The recommended decision alternative based on the expected value is

Below you are given a profit payoff table involving three decision alternatives and two states of nature. ​ The probability of occurrence of s₁ = .2. The expected value of the best alternative is

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

New information obtained through research or experimentation that enables an updating or revision of the state-of-nature probabilities is _____ information.