IS 242 Final Exam Questions and Answers (2022)

A tabular presentation that shows the outcome for each decision alternative under the various states of nature is called: A) a payback period matrix. B) a payoff table. C) a decision tree. D) a decision matrix. - ANSWER B Diff: 1 Keywords: payoff The difference between expected payoff under certainty and expected value of the best act without certainty is the: A) expected monetary value. B) expected value of perfect information. C) expected rate of return. D) expected net present value. - ANSWER B Diff: 1 Keywords: expected value of perfect information A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year. If the expanded advertising campaign is successful, the company expects sales to increase by $1.6 million next year. If the advertising campaign fails, the company expects sales to increase by only $400,000 next year. If the advertising budget is not increased, the company expects sales to increase by $200,000. Identify the states of nature in this decision making problem. A) Two possibilities: (1) campaign is successful and (2) campaign is not successful. B) The increase in sales dollars next year. C) Two choices: (1) increase the budget and (2) do not increase the budget. D) Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations. - ANSWER A Diff: 1 Keywords: states of the world A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year. If the expanded advertising campaign is successful, the company expects sales to increase by $1.6 million next year. If the advertising campaign fails, the company expects sales to increase by only $400,000 next year. If the advertising budget is not increased, the company expects sales to increase by $200,000. Identify the actions in this decision making problem. A) Two choices: (1) increase the budget and (2) do not increase the budget. B) The increase in sales dollars next year. C) Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations. D) Two possibilities: (1) campaign is successful and (2) campaign is not successful. - ANSWER A Diff: 1 Keywords: courses of action A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year. If the expanded advertising campaign is successful, the company expects sales to increase by $1.6 million next year. If the advertising campaign fails, the company expects sales to increase by only $400,000 next year. If the advertising budget is not increased, the company expects sales to increase by $200,000. Identify the outcomes in this decision making problem. A) Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations. B) Two choices: (1) increase the budget and (2) do not increase the budget. C) Two possibilities: (1) campaign is successful and (2) campaign is not successful. D) The increase in sales dollars next year. - ANSWER A Diff: 1 Keywords: outcomes A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year. If the expanded advertising campaign is successful, the company expects sales to increase by $1.6 million next year. If the advertising campaign fails, the company expects sales to increase by only $400,000 next year. If the advertising budget is not increased, the company expects sales to increase by $200,000. Identify the objective in this decision making problem. A) Four consequences resulting from the Increase/Do Not Increase and Successful/Not Successful combinations. B) The increase in sales dollars next year. C) Two choices: (1) increase the budget and (2) do not increase the budget. D) Two possibilities: (1) campaign is successful and (2) campaign is not successful. - ANSWER B Diff: 1 Keywords: objective The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, the opportunity loss for A3 when S2 occurs is A) 4 B) 5 C) 0 D) 6 - ANSWER B Diff: 2 Keywords: opportunity loss The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, the opportunity loss for A2 when S1 occurs is A) 14 B) 5 C) - 2 D) 0 - ANSWER A Diff: 2 Keywords: opportunity loss The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.4, then the probability of S2 is A) 1.0 B) 0.6 C) 0.4 D) 0.5 - ANSWER B Diff: 2 Keywords: probability The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.2 and S2 is 0.8, then the expected monetary value of A1 is A) 5.6 B) 8 C) 2.4 D) 16 - ANSWER A Diff: 2 Keywords: expected monetary value The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.2 and S2 is 0.8, then the expected opportunity loss (EOL) for A1 is A) 4.8 B) 0 C) 5.6 D) 1.2 - ANSWER A Diff: 2 Keywords: expected opportunity loss The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.2, what is the optimal alternative using EOL? A) A2 B) A3 C) A1 D) It cannot be determined. - ANSWER A Diff: 2 Keywords: decision making, expected opportunity loss The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.5, then the expected monetary value (EMV ) for A1 is A) 4 B) 3 C) 8 D) 6.5 - ANSWER C Diff: 2 Keywords: expected monetary value The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.5, then the expected monetary value (EMV ) for A2 is A) 8 B) 4 C) 3 D) 6.5 - ANSWER B Diff: 2 Keywords: expected monetary value The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.5, then the expected opportunity loss (EOL) for A1 is A) 8 B) 3 C) 4.5 D) 7 - ANSWER B Diff: 2 Keywords: expected opportunity loss The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.5, then the expected opportunity loss (EOL) for A3 is A) 8 B) 7 C) 4.5 D) 3 - ANSWER C Diff: 2 Keywords: expected opportunity loss The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.5, what is the optimal alternative using EMV? A) A1 B) A3 C) A2 D) It cannot be determined. - ANSWER A Diff: 2 Keywords: decision making, expected monetary value The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.5, then the EVPI for the payoff table is A) 3 B) 8 C) - 3 D) 11 - ANSWER A Diff: 2 Keywords: decision making, expected monetary value The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: S1 is state of nature 1 A1 is action alternative 1 S2 is state of nature 2 A2 is action alternative 2 A3 is action alternative 3 Referring to Table 17-1, if the probability of S1 is 0.5, then the return-to-risk ratio for A1 is A) 2 B) 4.333 C) 1.5 D) 0.667 - ANSWER A Diff: 2