BUSOBA 2321 MIDTERM EXAM
LATEST UPDATED
criteria of good decision - ANSWER logic-based
- considers all alternatives and information
-sometimes yields poor results
5 steps in decision making - ANSWER 1) definition of the problem
2) listing of all alternatives (options, rows)
3) listing of outcomes (states of nature, columns) for each alternative
4) listing of payoff for each pair of alternatives and outcome
5) choice of a method
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 (only with costs) - ANSWER
FCa+VCa*Q=FCb+VCb*Q
procedure to calculate indifference point - ANSWER 1) identify Equations for
each
2) equate each equation with each other and solve for Q
3) create indifference point table, define test points, plug back in equation
4) identify what points give best profit
MAXIMAX - ANSWER optimistic, take largest return alternative (rows), then
max of these alternatives
MAXMIN - ANSWER pessimistic, choose smallest return choice (rows), then
choose max of those choices
MINIMAX Regret - ANSWER 1) find best payoff for each state of nature
(column)
2) find regret for each pair
- what you would have gotten - what you got aka
best payoff - actual payoff
3) find max regret of each choice (row)
4) choose min of those max'sperfec
EMV stands for - ANSWER expected monetary value
EMV 's are - ANSWER the lines on your graph
how to find EMV - ANSWER Value (p) + Value (p-1)
EMV Max - ANSWER range of solutions
ex:
0 <= p <=.3 A
.3 <= p <=.7 B
.7 <= p <= 1 C
LATEST UPDATED
criteria of good decision - ANSWER logic-based
- considers all alternatives and information
-sometimes yields poor results
5 steps in decision making - ANSWER 1) definition of the problem
2) listing of all alternatives (options, rows)
3) listing of outcomes (states of nature, columns) for each alternative
4) listing of payoff for each pair of alternatives and outcome
5) choice of a method
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 (only with costs) - ANSWER
FCa+VCa*Q=FCb+VCb*Q
procedure to calculate indifference point - ANSWER 1) identify Equations for
each
2) equate each equation with each other and solve for Q
3) create indifference point table, define test points, plug back in equation
4) identify what points give best profit
MAXIMAX - ANSWER optimistic, take largest return alternative (rows), then
max of these alternatives
MAXMIN - ANSWER pessimistic, choose smallest return choice (rows), then
choose max of those choices
MINIMAX Regret - ANSWER 1) find best payoff for each state of nature
(column)
2) find regret for each pair
- what you would have gotten - what you got aka
best payoff - actual payoff
3) find max regret of each choice (row)
4) choose min of those max'sperfec
EMV stands for - ANSWER expected monetary value
EMV 's are - ANSWER the lines on your graph
how to find EMV - ANSWER Value (p) + Value (p-1)
EMV Max - ANSWER range of solutions
ex:
0 <= p <=.3 A
.3 <= p <=.7 B
.7 <= p <= 1 C
