Question 1

Consider the following decision scenario:   State of Nature  Yes  No  Small $10∗30 Medium 2040 Med.-Large 3045 Large 4035 Ex-Large 6020\begin{array} {r}  { 	ext { State of Nature } } \\begin{array} { | l | l | l | } \hline & 	ext { Yes } & 	ext { No } \\hline 	ext { Small } & \$ 10 ^ { * } & 30 \\hline 	ext { Medium } & 20 & 40 \\hline 	ext { Med.-Large } & 30 & 45 \\hline 	ext { Large } & 40 & 35 \\hline 	ext { Ex-Large } & 60 & 20 \\hline\end{array}\end{array} State of Nature  Small  Medium  Med.-Large  Large  Ex-Large ​ Yes $10∗20304060​ No 3040453520​​​  *PV for profits ($000)  The minimax regret strategy would be:

Accepted Answer

A)   small.
B)   medium.
C)   med.-large.
D)   large.
E)   ex-large. F) A) and C)
G) All of the above

Question 2

Which of the following would make decision trees an especially attractive decision-making tool?

Accepted Answer

A)   The need to think through a possible sequence of decisions.
B)   The need to maximize the expected value of perfect information.
C)   The need to minimize expected regret.
D)   The need to avoid suboptimization.
E)   The need to minimize costs.F) A) and D)
G) B) and D)

Question 3

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies. What is the probability that the statistics book would wind up being placed with a smaller publisher?

Accepted Answer

A)   .6
B)   .5
C)   .4
D)   .3
E)   0F) A) and B)
G) D) and E)

Exam 5: Extension: Decision Theory

Correct Answer
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Which of the following would make decision trees an especially attractive decision-making tool?

Correct Answer
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Correct Answer
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Exam 5: Extension: Decision Theory

Correct AnswerverifiedShow Answer

Which of the following would make decision trees an especially attractive decision-making tool?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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