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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.|

c.| Avoiding decisions leading to bad 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....