BUSOBA 2321 MIDTERM QUESTIONS AND ANSWERS
(SOLVED) 100% CORRECT
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)
(SOLVED) 100% CORRECT
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)
