Question Time Limit

10 point questions – 10 seconds

20 point questions – 2 minutes
30 point questions – 3 minutes
40 point questions – 4 minutes
50 point questions – 5 minutes

Rules
AC 1 1 0 3

10 10 10 10 10

20 20 20 20 20

30 30 30 30 30

40 40 40 40 40

50 50 50 50 50
Category 1 questions follow
Question The efficiency of sample information is

  a.  EVSI*(100%)
  b.  EVSI/EVPI*(100%)
  c.  EVwoSI/EVwoPI*(100%)
  d.  EVwSI/EVwoSI*(100%)

Category 1 10
Answer
b. EVSI/EVPI*(100%)

Category 1 10
Question To find the posterior probabilities,

  a.  use the EVPI to calculate conditional

probabilities.
  b.  use indicator probabilities to calculate prior
probabilities.
  c.  use prior and conditional probabilities to
calculate revised probabilities.
  d.  use sample information to revise the
conditional probabilities.

Category 1 20
Answer  
c.  use prior and conditional probabilities to
calculate revised probabilities.

Category 1 20
Question The difference between the expected value of an optimal strategy
based on sample information and the "best" expected value
without any sample information is called the

  a.  i​nformation sensitivity.

  b.  ​expected value of sample information.
  c.  ​expected value of perfect information.
  d.  ​efficiency of sample information.

Category 1 30
Answer
 
b. 
​expected value of sample information.

Category 1 30
Question Statement 1: A decision strategy is a sequence of decisions and chance
outcomes, where the decisions chosen depend on the yet to be determined
outcomes of chance events.
Statement 2: The terms 'stochastic' and 'deterministic' have the same
meaning in quantitative analysis.
Statement 3: After all probabilities and payoffs are placed on a decision tree,
the decision maker calculates expected values at the square nodes and
makes selections at round nodes.
Statement 4: The decision making process includes implementation and
evaluation of the decision.
 
a. Only one of the statements is false
b. Only one of the statements is true
c. Two of the statements are true
d. All of the statements are true
e. All of the statements are false

Category 1 40
Answer
b. Only one of the statements is true

Category 1 40
Question If P(high) = .3
P(low) = .7
P(favorable | high) = .9, and
P(unfavorable | low) = .6,

then P(favorable) =

Category 1 50
Answer
55% or .55

Category 1 50
Category 2 questions follow
Question
For a maximization problem, the conservative approach is often
referred to as the

  a.  minimax approach.

  b.  maximin approach.
  c.  maximax approach.
  d.  minimin approach.
     

Category 2 10
Answer
b. maximin approach.

Category 2 10
Question
Decision tree probabilities refer to the probability of

  a.  a​ n uncertain event occurring.

  b.  ​the decision being made.
  c.  ​finding an optimal value.
  d.  ​overlooked choices.

20
Answer
a. an uncertain event occurring.

Category 2 20
Question
Statement 1: Problem solving encompasses both the identification of a
problem and the action to resolve it.
Statement 2: Square nodes in a decision tree indicate that a decision must
be made.
Statement 3: The primary value of decision trees is as a useful way of
organizing how operations managers think about complex multiphase
decisions.
Statement 4: The decision making process includes implementation and
evaluation of the decision.
 
a. Only one of the statements is false
b. Only one of the statements is true
c. Two of the statements are true
d. All of the statements are true
e. All of the statements are false

Category 2 30
Answer
a. Only one of the statements is false

Category 2 30
Question
Statement 1: In quantitative analysis, the optimal solution is the mathematically-
best solution.
Statement 2: If you are deciding to buy either machine A, B, or C with the
objective of minimizing the sum of labor, material and utility costs, you are dealing
with a single-criterion decision.
Statement 3: Expected value is the sum of the weighted payoff possibilities at a
circular node in a decision tree.
Statement 4: The value of any model is that it enables the user to make
inferences about the real situation.
 
a. Only one of the statements is false
b. Only one of the statements is true
c. Two of the statements are true
d. All of the statements are true
All of the statements are false

40
Answer
d. All of the statements are true

Category 2 40
QuestionLakewood Fashions must decide how many lots of assorted ski wear to
order for its three stores. Information on pricing, sales, and inventory
costs has led to the following payoff table, in thousands.
​

​ Demand
Order Size Low Medium High
1 lot 12 15 15
2 lots 9 25 35
3 lots 6 35 60

What decision should be made using minimax regret?

Category 2 50
Answer
3 lots

Category 2 50
Category 3 questions follow
Question In an influence diagram, decision nodes are represented by

  a.  circles or ovals

  b.  squares or rectangles
  c.  diamonds
  d.  triangles

Category 3 10
Answer
b. squares or rectangles

Category 3 10
Question Which of the following approaches to decision making
requires knowledge of the probabilities of the states of
nature?
  a.  minimax regret
  b.  maximin
  c.  expected value
  d.  conservative

Category 3 20
Answer
c. 
expected value

Category 3 20
QuestionStatement 1: Risk analysis helps the decision maker recognize the difference between the
expected value of a decision alternative and the payoff that may actually occur.
Statement 2: EVPI is always greater than or equal to EVSI.
Statement 3: When the expected value approach is used to select a decision alternative, the
payoff that actually occurs will usually have a value different from the expected value.
Statement 4: The feasible solution is the best solution possible for a mathematical model.
 
a. Only one of the statements is false
b. Only one of the statements is true
c. Two of the statements are true
d. All of the statements are true
e. All of the statements are false

Category 3 30
Answer
a. Only one of the statements is false

Category 3 30
Question East West Distributing is in the process of trying to determine where they should schedule
next year's production of a popular line of kitchen utensils that they distribute.
Manufacturers in four different countries have submitted bids to East West. However, a
pending trade bill in Congress will greatly affect the cost to East West due to proposed
tariffs, favorable trading status, etc.

After careful analysis, East West has determined the following cost breakdown for the
four manufacturers (in $1,000's) based on whether or not the trade bill passes:​
  Bill Passes Bill Fails
Country A 260 210
Country B 320 160
Country C 240 240
Country D 275 210

If East West estimates that there is a 40% chance of the bill passing, which country should they
choose for manufacturing?

Category 3 40
Answer Using EV approach:
EV(A) = 230,
EV(B) = 224,
EV(C) = 240;

Choose Country B (lowest EV)

Category 3 40
Question
Super Cola is also considering the introduction of a root beer drink. The
company feels that the probability that the product will be a success is .6. The
payoff table is as follows:

  Success (s1) Failure (s2)

Produce (d1)   $250,000 −$300,000
​
Do Not
The Produce
company (d2a) choice
has −$  50,000 −$  20,000
of two research firms to obtain information for this
product. Stanton Marketing has market indicators, I1 and I2 for which P(I1 | s1)
= .7 and P(I1 | s2) = .4. New World Marketing has indicators J1 and J2 for which
P(J1 | s1) = .6 and P(J1 | s2) = .3.

What is the Expected Value of Perfect Information?

Category 3 50
Answer
$112,000

Category 3 50
Category 4 questions follow
Question The options from which a decision maker chooses a
course of action are

  a.  called the decision alternatives.

  b.  under the control of the decision
maker.
  c.  not the same as the states of nature.
  d.  All of the alternatives are true.

Category 4 10
Answer
 
a. called the decision alternatives.

Category 4 10
Question A model that uses a system of symbols to represent a problem is called

  a. iconic.
  b. constrained.
  c.  mathematical.
  d. analog.

Category 4 20
Answer
c. 
mathematical.

Category 4 20
Question
Statement 1: The process of decision making is more
limited than that of problem solving.
Statement 2: Efficiency of Sample information can range
even beyond 100%
Statement 3: Sample information with an efficiency rating
of 100% is perfect information.
Statement 4: The terms 'stochastic' and 'deterministic' have
the same meaning in quantitative analysis
 
a. Only one of the statements is false
b. Only one of the statements is true
c. Two of the statements are true
d. All of the statements are true
e. All of the statements are false

Category 4 30
Answer
c. Two of the statements are true

Category 4 30
Question Super Cola is also considering the introduction of a root beer drink. The
company feels that the probability that the product will be a success is .6. The
payoff table is as follows:

​
  Success (s1) Failure (s2)
Produce (d1)   $250,000 −$300,000
Do Not Produce (d2) −$  50,000 −$  20,000

Based on expected value, what is the optimal decision ?

Category 4 40
Answer
Produce a root beer drink (positive EV)

Category 4 40
Question
Super Cola is also considering the introduction of a root beer drink. The
company feels that the probability that the product will be a success is .6.
The payoff table is as follows:

  Success (s1) Failure (s2)

​
Produce (d1)   $250,000 −$300,000
The company has a choice of two research firms to obtain information for
Do Not Produce (d2) −$  50,000 −$  20,000
this product. Stanton Marketing has market indicators, I1 and I2 for which
P(I1 | s1) = .7 and P(I1 | s2) = .4. New World Marketing has indicators J1
and J2 for which P(J1 | s1) = .6 and P(J1 | s2) = .3.
If both firms charge $5,000, which firm should be hired?

Category 4 50
Answer
Hire Stanton

Category 4 50
Category 5 questions follow
Question A physical model that does not have the same physical
appearance as the object being modeled is

  a.  a qualitative model.

  b.  a mathematical model.
  c.  an analog model.
  d.  an iconic model.
 

Category 5 10
Answer
 
c.  an analog model.

Category 5 10
Question Inputs to a quantitative model

  a.  must all be deterministic if the problem is

to have a solution.
  b.  are uncertain for a stochastic model.
  c.  are a trivial part of the problem solving
process.
  d.  are uncontrollable for the decision
variables.

Category 5 20
Answer
 
b. 
are uncertain for a stochastic model.

Category 5 20
Question Statement 1: A feasible solution is one that satisfies at least one of the
constraints in the problem.
Statement 2: The decision alternative with the best expected monetary
value will always be the most desirable decision.
Statement 3: A company seeks to maximize profit subject to limited
availability of man-hours. Man-hours is a controllable input.
Statement 4: The expected value of an alternative can never be
negative.
 
a. Only one of the statements is false
b. Only one of the statements is true
c. Two of the statements are true
d. All of the statements are true
e. All of the statements are false

Category 5 30
Answer
e. All of the statements are false

Category 5 30
QuestionLakewood Fashions must decide how many lots of assorted ski wear to
order for its three stores. Information on pricing, sales, and inventory costs
has led to the following payoff table, in thousands.

​ Demand
Order Size Low Medium High
1 lot 12 15 15
2 lots 9 25 35
3 lots 6 35 60

What decision should be made by the optimist?

Category 5 40
Answer
3 Lots

Category 5 40
Question
Given the following information:

The state-of-nature probabilities are P(s1) 0.35, P(s2) 0.35, and P(s3) 0.30.

Conditional probabilities:
P(F|s1) = 0.10 P(F |s2) = 0.40 P(F|s3) = 0.60
P(U|s1) = 0.90 P(U |s2) = 0.60 P(U|s3) = 0.40

Using Baye’s Theorem, compute for the following posterior probabilities

P (s1|F) = ?
P (s2|F) = ?
P (s3|F) = ?
P (U) = ?
Category 5 50
Answer P (s1|F) = 9.86% or .0986
P (s2|F) = 39.44% or .3944
P (s3|F) = 50.7% or .5070
P (U) = 64.5% or .645

Category 5 50