BUSOBA 2321 MIDTERM STUDY GUIDE 2026 COMPREHENSIVE Q&A PASSED

BUSOBA 2321 MIDTERM STUDY GUIDE 2026
COMPREHENSIVE Q&A PASSED

⩥ States of nature. Answer: Not under control of decision maker
- favorable/unfavorable market


⩥ Profit Model. Answer: Profit = Px - (Vx + F)
(P = price X = quantity)
(V - Variable costs F - Fixed Costs)


⩥ Break Even Point. Answer: Revenue = Costs
(set profit equations equal to 0)


⩥ Indifference Points. Answer: Point where two proposals are equal to
each other, thus you are "indifferent" on the decisions
(Set profit equations equal to each other)


⩥ Payoff Table. Answer: Column 1 : List all decision alternatives
Column 2+ : States of nature (good/bad economy)
3 : fill in data for decision alternatives with corresponding data based on
states of nature (should be given)
* "do nothing" is an alternative

, ⩥ Maximax. Answer: best among best payoffs
-decision analysis method


⩥ Maximin. Answer: best among worst payoffs
-decision analysis method


⩥ Minimax Regret. Answer: best of worst regrets


⩥ Regret Table. Answer: Regret = opportunity loss
BEST PAYOFF - Actual PAYOFF


⩥ EMV-Equally Likely (LaPlace Criterion). Answer: -Assume all states
of nature are EQUALLY LIKELY
-Calculate Avg Payoff (EMV)
-select highest avg payoff
Can use EXPECTED VALUE method or DECISION TREES.


⩥ Expected Value Method. Answer: Use probabilities to calculate avg
Payoff/Loss
-Find EMV or EOL for each alternative