# Hw5A

Pages: 7 (1336 words) Published: May 12, 2013
HW 5a

Multiple Choice
Identify the choice that best completes the statement or answers the question.

__B__1.Although modeling provides valuable insight to decision makers, decision making remains a difficult task. Which of the following is not a primary cause for this difficulty discussed in the Decision Analysis chapter? a.| Uncertainty regarding the future.|

b.| Models provide decisions for the decision maker.|
c.| Conflicting values.|
d.| Conflicting objectives.|

__A__2.Which of the following is a goal of decision analysis? a.| Help individuals make good decisions.|
b.| Ensure decisions lead to good outcomes.|
d.| Reduce the role of luck in a decision.|

__A__3.Which of the following summarizes the final outcome for each decision alternative? a.| payoff matrix|
b.| outcome matrix|
c.| yield matrix|
d.| performance matrix|

__A__4.Which decision rule optimistically assumes that nature will always be "on our side" regardless of what decision we make? a.| maximax decision rule.|
b.| maximin decision rule.|
c.| minimax regret decision rule.|
d.| minimin decision rule.|

__B__5.Which decision rule pessimistically assumes that nature will always be "against us" regardless of what decision we make? a.| maximax decision rule.|
b.| maximin decision rule.|
c.| minimax regret decision rule.|
d.| minimin decision rule.|

__B__6.The decision rule which determines the minimum payoff for each alternative and then selects the alternative associated with the largest minimum payoff is the a.| maximax decision rule.|

b.| maximin decision rule.|
c.| minimax regret decision rule.|
d.| minimin decision rule.|

__B__7.The category of decision rule that contains the maximax decision rule is the a.| optimistic category.|
b.| non-probabilistic category.|
c.| probabilistic category.|
d.| optimality category.|

__D__8.The amount of opportunity lost in making a decision is called a.| loss.|
b.| frustration.|
c.| negative profit.|
d.| regret.|

Scenario 15-1

An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem.

| A| B| C| D|
1| | Payoff Matrix| |
2| | | | |
3| | Economy| |
4| Investment| Decline| Expand| |
5| A| 0| 85| |
6| B| 25| 65| |
7| C| 40| 30| |
8| Bank| 10| 10| |
| Payoffs|

__C__9.Refer to Scenario 15-1. What decision should be made according to the maximin decision rule? a.| A|
b.| B|
c.| C|
d.| Bank|

__B__10.Refer to Scenario 15-1. What decision should be made according to the minimax regret decision rule? a.| A|
b.| B|
c.| C|
d.| Bank|

Scenario 15-2

An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem.

| A| B| C| D| E| F| G| H|
1| | Payoff Matrix| | | | Regret Matrix| | |
2| | | | | | | | |
3| | Economy| | | | Economy| | |
4| Investment| Decline| Expand| | Investment| Decline| Expand| | 5| A| 0| 85| | A| | | |
6| B| 25| 65| | B| | | |
7| C| 40| 30| | C| | | |
8| Bank| 10| 10| | Bank| | | |

__D__11.Refer to Scenario 15-2. What formula should go in cell F5 of the Regret Matrix to compute the regret value? a.| =B\$5-MAX(B\$5:B\$8)|
b.| =MAX(B\$5:B\$8)-MAX(B5)|
c.| =MAX(B\$5:B\$8)-MIN(B\$5:B\$8)|
d.| =MAX(B\$5:B\$8)-B5|

__B__12....