Test bank quantitative analysis
for management 9th edition
barry render
Education (Wesleyan University-Philippines)
,Decision Analysis ● Chapter 3
TRUE/FALSE
3.1 Expected Monetary Value (EMV) is the average or expected monetary outcome of a
decision if it can be repeated a large number of times.
ANSWER: TRUE
3.2 Expected Monetary Value (EMV) is the payoff you should expect to occur when you
choose a particular alternative.
ANSWER: FALSE
3.3 The decision maker has little or no control over a state of nature.
ANSWER: TRUE
3.4 Decision making under risk is a probabilistic decision situation.
ANSWER: TRUE
3.5 The difference in decision making under risk and decision making under uncertainty is
that under risk, we think we know the probabilities of the states of nature, while under
uncertainty we do not know the probabilities of the states of nature.
ANSWER: TRUE
3.6 EVPI (Expected Value of Perfect Information) is a measure of the maximum value
of additional information.
ANSWER: TRUE
3.7 When using the EOL as a decision criterion, the best decision is the alternative with
the least EOL value.
ANSWER: TRUE
3.8 To determine the effect of input changes on decision results, we should perform
a sensitivity analysis.
ANSWER: TRUE
3.9 The maximax decision criterion is used by pessimistic decision makers and maximizes
the maximum outcome for every alternative.
ANSWER: FALSE
3.10 The maximin decision criterion is used by pessimistic decision makers and minimizes
the maximum outcome for every alternative.
ANSWER: FALSE
,Decision Analysis ● Chapter 3
3.11 Marginal analysis is an aid to decision making when there are a large number
of alternatives and/or states of nature.
ANSWER: TRUE
3.12 The decision theory processes of maximizing Expected Monetary Value and
minimizing Expected Opportunity Loss should lead us to choose the same alternatives.
ANSWER: TRUE
3.13 The several criteria (maximax, maximin, equally likely, criterion of realism, minimax)
used for decision making under uncertainty may lead to the choice of different alternatives.
ANSWER: TRUE
3.14 One advantage of using decision trees over decision tables when making
sequential decisions is that the tree better depicts the sequential aspect of the
decisions.
ANSWER: TRUE
3.15 The nodes on decision trees represent either decisions or states of nature.
ANSWER: TRUE
3.16 Any problem that can be presented in a decision table can also be graphically portrayed in
a decision tree.
ANSWER: TRUE
3.17 Any problem that can be represented in a decision tree can be easily portrayed in a
decision table.
ANSWER: FALSE
3.18 The expected value of sample information (EVSI) is equal to the expected value of the
best decision with sample information (at no cost to gather) less the maximum expected
monetary value (EMV).
ANSWER: TRUE
3.19 The EMV approach and Utility theory always result in the same choice of alternatives.
ANSWER: FALSE
3.20 Utility theory may help the decision maker include the impact of qualitative factors that
are difficult to include in the EMV model.
ANSWER: TRUE
39
, Full file at http://testbank360.eu/test-bank-quantitative-analysis-for-management-9th-edition-barry-render
3.21 In a decision problem where we wish to use Bayes' theorem to calculate posterior
probabilities, we should always begin our analysis with the assumption that all states
of nature are equally likely, and use the sample information to revise these
probabilities to more realistic values.
ANSWER: FALSE
3.22 A utility curve that shows utility increasing at an increasing rate as the monetary
value increases represents the utility curve of a risk seeker.
ANSWER: TRUE
3.23 A utility curve that shows utility increasing at a decreasing rate as the monetary
value increases represents the utility curve of a risk seeker.
ANSWER: FALSE
3.24 If someone has a utility curve that increases linearly with increasing monetary value,
we would call this person risk indifferent or risk neutral.
ANSWER: TRUE
3.25 Utility values range from -1 to +1.
ANSWER: FALSE
3.26 By studying a person's Utility Curve, one can determine whether the individual is a
risk seeker, risk avoider, or is indifferent to risk.
ANSWER: TRUE
3.27 Rational people make decisions that maximize the expected utility.
ANSWER: TRUE
3.28 Utility theory provides a decision criterion that is superior to the EMV or EOL in that
it may allow the decision maker to incorporate her own attitudes toward risk
ANSWER: TRUE
3.29 The assignment of a utility value of 1 to an alternative implies that alternative is
preferred to all others.
ANSWER: TRUE
3.30 The assignment to a utility value of 0 to an alternative implies the alternative is
preferred to all others.
ANSWER: FALSE
for management 9th edition
barry render
Education (Wesleyan University-Philippines)
,Decision Analysis ● Chapter 3
TRUE/FALSE
3.1 Expected Monetary Value (EMV) is the average or expected monetary outcome of a
decision if it can be repeated a large number of times.
ANSWER: TRUE
3.2 Expected Monetary Value (EMV) is the payoff you should expect to occur when you
choose a particular alternative.
ANSWER: FALSE
3.3 The decision maker has little or no control over a state of nature.
ANSWER: TRUE
3.4 Decision making under risk is a probabilistic decision situation.
ANSWER: TRUE
3.5 The difference in decision making under risk and decision making under uncertainty is
that under risk, we think we know the probabilities of the states of nature, while under
uncertainty we do not know the probabilities of the states of nature.
ANSWER: TRUE
3.6 EVPI (Expected Value of Perfect Information) is a measure of the maximum value
of additional information.
ANSWER: TRUE
3.7 When using the EOL as a decision criterion, the best decision is the alternative with
the least EOL value.
ANSWER: TRUE
3.8 To determine the effect of input changes on decision results, we should perform
a sensitivity analysis.
ANSWER: TRUE
3.9 The maximax decision criterion is used by pessimistic decision makers and maximizes
the maximum outcome for every alternative.
ANSWER: FALSE
3.10 The maximin decision criterion is used by pessimistic decision makers and minimizes
the maximum outcome for every alternative.
ANSWER: FALSE
,Decision Analysis ● Chapter 3
3.11 Marginal analysis is an aid to decision making when there are a large number
of alternatives and/or states of nature.
ANSWER: TRUE
3.12 The decision theory processes of maximizing Expected Monetary Value and
minimizing Expected Opportunity Loss should lead us to choose the same alternatives.
ANSWER: TRUE
3.13 The several criteria (maximax, maximin, equally likely, criterion of realism, minimax)
used for decision making under uncertainty may lead to the choice of different alternatives.
ANSWER: TRUE
3.14 One advantage of using decision trees over decision tables when making
sequential decisions is that the tree better depicts the sequential aspect of the
decisions.
ANSWER: TRUE
3.15 The nodes on decision trees represent either decisions or states of nature.
ANSWER: TRUE
3.16 Any problem that can be presented in a decision table can also be graphically portrayed in
a decision tree.
ANSWER: TRUE
3.17 Any problem that can be represented in a decision tree can be easily portrayed in a
decision table.
ANSWER: FALSE
3.18 The expected value of sample information (EVSI) is equal to the expected value of the
best decision with sample information (at no cost to gather) less the maximum expected
monetary value (EMV).
ANSWER: TRUE
3.19 The EMV approach and Utility theory always result in the same choice of alternatives.
ANSWER: FALSE
3.20 Utility theory may help the decision maker include the impact of qualitative factors that
are difficult to include in the EMV model.
ANSWER: TRUE
39
, Full file at http://testbank360.eu/test-bank-quantitative-analysis-for-management-9th-edition-barry-render
3.21 In a decision problem where we wish to use Bayes' theorem to calculate posterior
probabilities, we should always begin our analysis with the assumption that all states
of nature are equally likely, and use the sample information to revise these
probabilities to more realistic values.
ANSWER: FALSE
3.22 A utility curve that shows utility increasing at an increasing rate as the monetary
value increases represents the utility curve of a risk seeker.
ANSWER: TRUE
3.23 A utility curve that shows utility increasing at a decreasing rate as the monetary
value increases represents the utility curve of a risk seeker.
ANSWER: FALSE
3.24 If someone has a utility curve that increases linearly with increasing monetary value,
we would call this person risk indifferent or risk neutral.
ANSWER: TRUE
3.25 Utility values range from -1 to +1.
ANSWER: FALSE
3.26 By studying a person's Utility Curve, one can determine whether the individual is a
risk seeker, risk avoider, or is indifferent to risk.
ANSWER: TRUE
3.27 Rational people make decisions that maximize the expected utility.
ANSWER: TRUE
3.28 Utility theory provides a decision criterion that is superior to the EMV or EOL in that
it may allow the decision maker to incorporate her own attitudes toward risk
ANSWER: TRUE
3.29 The assignment of a utility value of 1 to an alternative implies that alternative is
preferred to all others.
ANSWER: TRUE
3.30 The assignment to a utility value of 0 to an alternative implies the alternative is
preferred to all others.
ANSWER: FALSE
