ECN 601 Topic 6 Problems; Chapter 17, 19, 20

1. Question: The expected value of an uncertain outcome is: 2. Question: If your uncle offers you a deal with an expected value much greater than your cost to take part: 3. Question: You have to choose between risky options A and B. You calculate the expected value of A is greater than the expected value of B by am3%. Your likely course of action is: 4. Question: You have to decide whether to sell widgets for $5 or $6 when your marginal cost is $3. In the past, you have had 15% success making the sale at the $5 price and only io% success at the $6 price: 5. Question: You have to decide whether to sell widgets for 85 or s6 when your marginal cost is $3. In the past, you have had 15% success making the sale at the $5 price and only io% success at the $6 price. You might increase your profits by: 6. Question: Selection bias occurs: 7. Question: Randomized experiments represent the "gold standard" in data analytics because: 8. Question: The key determinant of a careful observational study is: 9. Question: If your analysis leads you to reject a hypothesis that is actually correct: 10. Question: A manager will decide to fund too few projects with uncertain outcomes if: 11. Question: The difference between risk and uncertainty is: 12. Question: A way to deal with uncertainty is: 13. Question: The expected value of a gamble that pays $10 with probability 0.2 and $-4 with probability o.8 is: 14. Question: It will exceed the average profits with probability o.3, will meet profit expectations with probability 0.5, and will fail with probability o.2. It will generate net present value of profits of $5oo,000 if it exceeds expectations, $ioo,000 if it meets expectations, and $-400,000 if it fails. What are the expected profits from the new plant? 15. Question: Gamble A pays $100 with probability 4o% and $-3o with probability 6o%. Gamble B pays $16o with probability 3o% and $-4o with probability 70%. Which would you choose as the higher expected value? 16. Question: Market research shows that there high-value customers are willing to pay $200 for your house cleaning service and low-value customers are willing to pay $175. High value types represent 4o% of the population. If marginal cost is $ioo, at the optimal price, what are your expected profits per customer? 17. Question: Market research shows that there high-value customers are willing to pay $20o for your house cleaning service and low-value customers are willing to pay $175. High value types represent 4o% of the population. If marginal cost is $1.00, which is the optimal strategy? 18. Question: When there are no systematic differences between treatment and control groups: 19. Question: In observational studies: 20. Question: Managers who can get more projects approved and oversee more assets get promoted faster. When making proposals to headquarters for new projects, these managers tend to develop support with analyses they perform. 21. Question: Based on expected error costs, you calculate that you should fund a project if it has better than a 6o% chance of success. Your analy tics team conducted three different studies resulting in estimates of the probability of success at 65%, 71% and 58%: 22. Question: When devising a strategy with considerable uncertainty: