BUSOBA 2321 Midterm Exam Questions with Correct Answers Latest Update 2026/2027
characteristics of a good decision - Answers -based on logic
-considers all options and info available
-sometimes gives unfavorable results
5 steps of the decision making process - Answers 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 = - Answers revenue - cost
revenue = - Answers Price x Quantity
costs = - Answers fixed costs + (quantity x variable costs)
Profit line equation - Answers (P-VC) x Q - FC
break even point graph - Answers FC= intercept
(P-VC)= slope
x intercept = break even point
indifference point - Answers when total costs are equal to profit
indifference point equation (with price) - Answers (Pa-VCa)Q-FCa=(Pb-VCb)Q-FCb
indifference point equation (with costs only) - Answers FCa+VCa*Q=FCb+VCb*Q
Steps to calculating indifference point - Answers 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 - Answers optimistic, choosing biggest return option (rows), then max of these
options
MAXMIN - Answers pessimistic, choosing the smallest return option (rows), then take the max
, of these options
MINIMAX Regret - Answers 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)
4) take the min of these max'sperfec
EMV stands for - Answers expected monetary value
EMV 's are - Answers the lines on your graph
how to find EMV - Answers Value (p) + Value (p-1)
EMV Max - Answers range of solutions
ex:
0 <= p <= .3 A
.3 <= p <= .7 B
.7 <= p <= 1 C
- find these by setting EMV's = to each other
- this is the line that is made when all EMV's are graphed and you are looking at the maximum
solutions
EVwPI means - Answers expected value with perfect info
- perfect info would tell us with certainty what outcome is going to occur
EVwPI is what on a graph - Answers A line created by connecting the two highest points on
either side of the y axis's
EVwPI calculation - Answers Slope + y int
characteristics of a good decision - Answers -based on logic
-considers all options and info available
-sometimes gives unfavorable results
5 steps of the decision making process - Answers 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 = - Answers revenue - cost
revenue = - Answers Price x Quantity
costs = - Answers fixed costs + (quantity x variable costs)
Profit line equation - Answers (P-VC) x Q - FC
break even point graph - Answers FC= intercept
(P-VC)= slope
x intercept = break even point
indifference point - Answers when total costs are equal to profit
indifference point equation (with price) - Answers (Pa-VCa)Q-FCa=(Pb-VCb)Q-FCb
indifference point equation (with costs only) - Answers FCa+VCa*Q=FCb+VCb*Q
Steps to calculating indifference point - Answers 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 - Answers optimistic, choosing biggest return option (rows), then max of these
options
MAXMIN - Answers pessimistic, choosing the smallest return option (rows), then take the max
, of these options
MINIMAX Regret - Answers 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)
4) take the min of these max'sperfec
EMV stands for - Answers expected monetary value
EMV 's are - Answers the lines on your graph
how to find EMV - Answers Value (p) + Value (p-1)
EMV Max - Answers range of solutions
ex:
0 <= p <= .3 A
.3 <= p <= .7 B
.7 <= p <= 1 C
- find these by setting EMV's = to each other
- this is the line that is made when all EMV's are graphed and you are looking at the maximum
solutions
EVwPI means - Answers expected value with perfect info
- perfect info would tell us with certainty what outcome is going to occur
EVwPI is what on a graph - Answers A line created by connecting the two highest points on
either side of the y axis's
EVwPI calculation - Answers Slope + y int
