SAINT GBA334 module 2 quiz 1

Consider the following payoff table that represents the
profits earned for each alternative (A, B, and C) under the states of nature
S1, S2, and S3.

S1 S2 S3
A $60 $145
$120
B $75 $125
$110
C $95 $85
$130

Using the Laplace criterion, what would be the highest
expected payoff?

$103.3

$108.3

$120

$125

$145

Question 2. Question
: ABC Inc. must make a decision
on its current capacity for next year. Estimated profits (in $000s) based on
next year’s demand are shown in the table below.

Next Year’s Demand
Alternative
Low High
Expand
$100 $200
Subcontract
$50 $120
Do nothing
$40 $50

Using the information above, which alternative should be
chosen based on the minimax regret criterion?

Expand

Subcontract

Do nothing

Question 3. Question
: A plant manager is considering
buying additional stamping machines to accommodate increasing demand. The
alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits
realized under each alternative are a function of whether their bid for a
recent defense contract is accepted or not. The payoff table below illustrates
the profits realized (in $000’s) based on the different scenarios faced by the
manager.

Alternative
Bid Accepted Bid
Rejected
Buy 1 machine
$10 $5
Buy 2 machines
$30 $4
Buy 3 machines
$40 $2

Using the information above, which alternative should be
chosen based on the minimax regret criterion?

Buy 1 machine

Buy 2 machines

Buy 3 machines

Points Received: 0 of 3
Comments:

Question 4. Question
: ABC Inc. must make a decision
on its current capacity for next year. Estimated profits (in $000s) based on
next year’s demand are shown in the table below.

Next Year’s Demand
Alternative
Low High
Expand
$100 $200
Subcontract
$50 $120
Do nothing
$40 $50

Using the information above, which alternative should be
chosen based on the criterion of realism with alpha = 0.7?

Expand

Subcontract

Do nothing

Question 5. Question
: ABC Inc. must make a decision
on its current capacity for next year. Estimated profits (in $000s) based on
next year’s demand are shown in the table below.

Next Year’s Demand
Alternative
Low High
Expand
$100 $200
Subcontract
$50 $120
Do nothing
$40 $50

Refer to the information above. Assume that ABC Inc. has
hired a marketing research firm that provided additional information regarding
next year’s demand. Suppose that the probabilities of low and high demand are
assessed as follows: P(Low) = 0.4 and P(High) = 0.6.

What is the expected value under certainty?

0

140

160

200

Question 6. Question
: Consider the following payoff
table that represents the profits earned for each alternative (A, B, and C)
under the states of nature S1, S2, and S3.

S1 S2 S3
A $60
$145 $120
B $75 $125
$110
C $95 $85
$130

What is the expected
value of perfect information (EVPI)? Assume P(S1) = 0.5 and P(S2) = 0.25.

$0

$11.25

$15

$20

$35

Question 7. Question
: If the coefficient of realism
alpha equals 1, then the criterion of realism will yield the same result as the
maximax criterion.

True
False

Question 8. Question
: A plant manager is considering
buying additional stamping machines to accommodate increasing demand. The
alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits
realized under each alternative are a function of whether their bid for a
recent defense contract is accepted or not. The payoff table below illustrates
the profits realized (in $000’s) based on the different scenarios faced by the
manager.

Alternative
Bid Accepted Bid
Rejected
Buy 1 machine
$10 $5
Buy 2 machines
$30 $4
Buy 3 machines
$40 $2

Refer to the information above. Assume that based on
historical bids with the defense contractor, the plant manager believes that
there is a 65% chance that the bid will be accepted and a 35% chance that the
bid will be rejected.

What is the expected value under certainty?

1.05

1.95

17.25

27.75

Question 9. Question
: A bakery must decide how many
pies to prepare for the upcoming weekend. The bakery has the option to make 50,
100, or 150 pies. Assume that demand for the pies can be 50, 100, or 150. Each
pie costs $5 to make and sells for $7. Unsold pies are donated to a nearby
charity center. Assume that there is no opportunity cost for lost sales.

Using the information above, which alternative should be
chosen based on the maximin criterion?

Make 50 pies

Make 100 pies

Make 150 pies

Question 10. Question
: A plant manager is considering
buying additional stamping machines to accommodate increasing demand. The
alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits
realized under each alternative are a function of whether their bid for a
recent defense contract is accepted or not. The payoff table below illustrates
the profits realized (in $000’s) based on the different scenarios faced by the
manager.

Alternative
Bid Accepted Bid
Rejected
Buy 1 machine
$10 $5
Buy 2 machines
$30 $4
Buy 3 machines
$40 $2

Using the information above, which alternative should be
chosen based on the criterion of realism with alpha = 0.8?

Buy 1 machine

Buy 2 machines

Buy 3 machines