BUSOBA 2321 Midterm questions And Answers Verified 100% Correct

BUSOBA 2321 Midterm questions And Answers Verified 100% Correct when "n" states of nature p= - ANSWER -1/n EOL calculation - ANSWER -SUM (regret of outcome * probability) - repeat for each option (row), choose smallest EMV calculation - ANSWER -SUM (payoff of outcome * probability) - repeat for each option (row), choose largest What are the assumptions of a linear model - ANSWER -1) certainty 2) proportionality 3) additivity 4) divisibility What are the properties of a linear model - ANSWER -1) represents a business problem 2) max/min some quantity 3) limitations - constraints 4) must be alternatives available LHS has - ANSWER -decision variables RHS has - ANSWER -constraints Steps for linear programming - ANSWER -1) define decision variables 2) make objective function (what are we max/min) 3) write out constraints 4) graph constraints (find x and y int) 5) find the optimal solution (plug in corner points to objective function) linear programming: - ANSWER -continuous decision variables with the objective function and all constraints linear non linear programming - ANSWER -1 constraint is non linear, decision variables are continuous integer programming - ANSWER -at least one discrete decision variable with the objective function and all constraints linear non linear integer - ANSWER -at least one discrete decision variable, and or at least one constraint non linear Corner Point Theorem - ANSWER -optimal solution of a linear program problem occurs at one of the linear corner points of the feasible region corner points - ANSWER -where constraints used to generate feasible region intersect Types of solution of to linear programming - ANSWER -1) unique optimal 2) multiple optimal 3) infeasible solution 4) unbounded unique optimal solution - ANSWER -(one optimal solution) only 1 corner point will yield the optimum objective function value multiple optimal - ANSWER -(more that one optimal) 2 corner points yield the same objective function value, all points on the line segment connecting the optimal corner points will also be optimal infeasible solution - ANSWER -(no solution) no point that satisfies all constraints, no feasible region, no corner points unbounded - ANSWER -one variable unconstrained and can go to infinity shadow price - ANSWER -the change in the objective function value when the right hand side of the constraint is increased by 1 unit characteristics of a good decision - ANSWER --based on logic -considers all options and info available -sometimes gives unfavorable results 5 steps of the decision making process - ANSWER -1) define problem 2) list all alternatives (options, rows) 3) identify outcomes (states of nature, columns) for each alternative 4) identify payoff for each combo of alternatives and outcome 5) pick a technique profit = - ANSWER -revenue - cost revenue = - ANSWER -Price x Quantity costs = - ANSWER -fixed costs + (quantity x variable costs) Profit line equation - ANSWER -(P-VC) x Q - FC break even point graph - ANSWER -FC= intercept (P-VC)= slope x intercept = break even point indifference point - ANSWER -when total costs are equal to profit indifference point equation (with price) - ANSWER -(Pa-VCa)Q-FCa=(Pb VCb)Q-FCb indifference point equation (with costs only) - ANSWER FCa+VCa*Q=FCb+VCb*Q Steps to calculating indifference point - ANSWER -1) Determine Equations for each 2) Set each equation equal to each other and solve for Q 3) make indifference point table, set test points, plug back into equation 4) determine which points yield the highest profit MAXIMAX - ANSWER -optimistic, choosing biggest return option (rows), then max of these options MAXMIN - ANSWER -pessimistic, choosing the smallest return option (rows), then take the max of these options MINIMAX Regret - ANSWER -1) find best outcome for each state of nature (column) 2) determine the regret for each combo - what you could have had - what you got aka best payoff - actual payoff 3) find the max regret of each option (row)