Palgrave Macmillan - Business - Quantitative Methods for Business

Which of the following is not a component of a decision problem?
1. Objective
2. Courses of action
3. Outcome
4. Uncontrollable events
What does each row of a payoff table usually correspond to?
1. Alternative courses of action
2. Uncontrollable events
3. Payoffs
4. Objectives
Which decision making criterion involves choosing the course of action which minimizes the maximum opportunity loss?
1. The maximin criterion
2. The minimax regret criterion
3. The maximax criterion
4. The expected value criterion
I roll a standard six-sided die and receive £10 if it lands with 6 on the uppermost face but lose £2 if it does not. What is the expected value of my gain?
1. £0
2. £10
3. £1.67
4. £2
A decision problem consists of 4 alternative courses of action, A, B, C, and D. There are 2 uncontrollable events X, and Y which are equally likely. The following payoff table has been prepared:

X Y
A £20000 -£10000
B £2000 £5000
C -£1000 £8000
D 0 £6000
1. A
2. B
3. C
4. D
Apply the maximin criterion to the decision problem in question 5. Which course of action would you choose?
1. A
2. B
3. C
4. D
Apply the minimax regret criterion to the decision problem in question 5. Which course of action would you choose?
1. B and D are equally desirable
2. B and C are equally desirable
3. A and C are equally desirable
4. A and B are equally desirable
Apply the expected value criterion to the decision problem in question 5. Which course of action would you choose?
1. A
2. B
3. C
4. D
Which of the following is not part of a decision tree?
1. Decision point
2. Branch
3. Dummy activity
4. Uncertainty node
Which of the following statements about decision trees is not true?
1. A decision point is represented by a square node
2. Each route through the tree represents one possible combination of decisions and uncontrollable events
3. A payoff can be assigned to each route through the tree
4. A decision tree is only appropriate when there is only one decision to make and one set of uncontrollable events.

Quiz