Bana 2081 Exam 3 Questions with Correct
Answers
__________ refer to the probabilities of the states of nature after revising the prior
probabilities based on sample information.
Posterior probabilities
The study of how changes in the probability assessments for the states of nature or
changes in the payoffs affect the recommended decision alternative is known as
sensitivity analysis.
No more than one state of nature can occur at a given time for a chance event. This
indicates that the states of nature are defined such that they are
mutually exclusive.
Greentrop Pharmaceutical Products are the world leader in the area of sleep aids. Its
major product is "Dozealot". The Research-and-Development Division has defined two
alternatives to improve the quality of the product. These alternatives are simple
reformulations of the product to minimize the side effects and to improve the product
efficacy. To conduct an analysis, management has decided to consider the possible
demands for the drug under each alternative. The following payoff table shows the
projected profit in millions of dollars.
Demand
Decision Alternatives Low Medium High
d1 $500 $350 $525
d2 $875 $300 $765
, If the decision maker knows nothing about the probabilities of three states of nature,
what is the minimum maximum regret?
50
A construction company must decide on the size of the shopping mall, i.e. Large,
Medium or Small, that has to be constructed in their acquired plot in the sub-urban
area of Seattle. Due to the market conditions, the number of visitors to the mall will be
High, Moderate, or Low. The level of response and the size of the mall will decide the
return of investment from the mall. The profit payoff table for management (in millions
of dollars) after 5 years is provided below.
Mall Size # of Visitors
Large: High 25, Moderate 15, Low -20
Medium: High 20, Moderate 12, Low -10
Small: High 15, Moderate 13, Low 5
The probabilities are P(High) = 0.35, P(Moderate) = 0.40, and P(Low) = 0.25.
What is the expected value with perfect information?
Round your answer to two decimal places.
16
A(n) __________ is a set of points defining the minimum possible risk for a set of return
values.
efficient frontier
A ___________ uses repeated random sampling to represent uncertainty in a model
representing a real system and that computes the values of model outputs.
Answers
__________ refer to the probabilities of the states of nature after revising the prior
probabilities based on sample information.
Posterior probabilities
The study of how changes in the probability assessments for the states of nature or
changes in the payoffs affect the recommended decision alternative is known as
sensitivity analysis.
No more than one state of nature can occur at a given time for a chance event. This
indicates that the states of nature are defined such that they are
mutually exclusive.
Greentrop Pharmaceutical Products are the world leader in the area of sleep aids. Its
major product is "Dozealot". The Research-and-Development Division has defined two
alternatives to improve the quality of the product. These alternatives are simple
reformulations of the product to minimize the side effects and to improve the product
efficacy. To conduct an analysis, management has decided to consider the possible
demands for the drug under each alternative. The following payoff table shows the
projected profit in millions of dollars.
Demand
Decision Alternatives Low Medium High
d1 $500 $350 $525
d2 $875 $300 $765
, If the decision maker knows nothing about the probabilities of three states of nature,
what is the minimum maximum regret?
50
A construction company must decide on the size of the shopping mall, i.e. Large,
Medium or Small, that has to be constructed in their acquired plot in the sub-urban
area of Seattle. Due to the market conditions, the number of visitors to the mall will be
High, Moderate, or Low. The level of response and the size of the mall will decide the
return of investment from the mall. The profit payoff table for management (in millions
of dollars) after 5 years is provided below.
Mall Size # of Visitors
Large: High 25, Moderate 15, Low -20
Medium: High 20, Moderate 12, Low -10
Small: High 15, Moderate 13, Low 5
The probabilities are P(High) = 0.35, P(Moderate) = 0.40, and P(Low) = 0.25.
What is the expected value with perfect information?
Round your answer to two decimal places.
16
A(n) __________ is a set of points defining the minimum possible risk for a set of return
values.
efficient frontier
A ___________ uses repeated random sampling to represent uncertainty in a model
representing a real system and that computes the values of model outputs.
