Operations Management Exam Revision
Department of Decision Sciences
San Francisco State University
FINAL EXAM QUESTIONS
The sample problems below are organized by topic. Where possible, answers are given.
Disclaimers:
• These questions are questions that have appeared on previous years’ (final) examinations.
They are for practice only. There is no guarantee that the questions on your finals will be the same, or that different professors will give the same types of questions.
• Not all 412/786 sections cover the same material. The questions may contain material that is unfamiliar to you, or not contain material you covered. If you have concerns about the topics for your final, talk to your professor.
• Short answer and multiple choice questions are not included in this handout.
• Some questions may have been slightly modified to make them more general.
Decision Analysis
1. Sheree is deciding on how to invest her $1000 tax refund. She reads that Merck is partnering with a small biotech firm to produce a cancer drug which may or may not receive FDA approval in the next six months. If the FDA approves it, the biotech firm’s stock will double in value, but if it rejects it, the firm goes bankrupt and its stock becomes worthless. Merck is a huge pharmaceutical, so approval will result in a 20% appreciation in stock, and rejection in a 10% decrease. She is also considering hedging her bets and investing half her money in Merck and half in the Biotech firm. She could also put her money in a safe mutual fund, with a small (but guaranteed) 3% increase in value in the next six months.
a) Fill in the decision table, labeling all decisions, outcomes and payoffs. Express payoffs in terms of expected portfolio value at the end of six months. Hint: the table has the correct dimensions.
Outcomes
___________
Decisions
_____________
___________
___________
___________
_______
b) Given the payoff table what is Sheree’s best decision using the Laplace, Maximax, and
Maximin
San Francisco State University
FINAL EXAM QUESTIONS
The sample problems below are organized by topic. Where possible, answers are given.
Disclaimers:
• These questions are questions that have appeared on previous years’ (final) examinations.
They are for practice only. There is no guarantee that the questions on your finals will be the same, or that different professors will give the same types of questions.
• Not all 412/786 sections cover the same material. The questions may contain material that is unfamiliar to you, or not contain material you covered. If you have concerns about the topics for your final, talk to your professor.
• Short answer and multiple choice questions are not included in this handout.
• Some questions may have been slightly modified to make them more general.
Decision Analysis
1. Sheree is deciding on how to invest her $1000 tax refund. She reads that Merck is partnering with a small biotech firm to produce a cancer drug which may or may not receive FDA approval in the next six months. If the FDA approves it, the biotech firm’s stock will double in value, but if it rejects it, the firm goes bankrupt and its stock becomes worthless. Merck is a huge pharmaceutical, so approval will result in a 20% appreciation in stock, and rejection in a 10% decrease. She is also considering hedging her bets and investing half her money in Merck and half in the Biotech firm. She could also put her money in a safe mutual fund, with a small (but guaranteed) 3% increase in value in the next six months.
a) Fill in the decision table, labeling all decisions, outcomes and payoffs. Express payoffs in terms of expected portfolio value at the end of six months. Hint: the table has the correct dimensions.
Outcomes
___________
Decisions
_____________
___________
___________
___________
_______
b) Given the payoff table what is Sheree’s best decision using the Laplace, Maximax, and
Maximin