Hello, I need help to understand how to solve these practice questions:

1.Which of the following are common components of decision scenarios? (Mark all that apply.)

Outcomes

Options

Probabilities

States of nature

2.Fine Art Dot Com (FADC), a showcase website for artists, is faced with a prospect to grow. Specifically, they can make an investment that expands server capacity, band-with capability, and tech-support staff. This would allow for increased exposure and the opportunity to reach and profit from a broader customer base. Management is questioning the timing of the decision (whether the investment should be made now or in two years), as well as whether such an investment is even necessary.

A range of factors influence the success of the investment, including competitors' behavior, market trends, and customer preferences for this sales and distribution channel.

Past experience suggests that investments like these are relatively successful (i.e., there is a 60% likelihood that the investment will increase profits).

If successful, profits are estimated to increase 20%. If not successful, the investment will lead to a decrease in profits of 80%.

Suppose you are characterizing and characterizing this scenario in a decision tree. Which of the following statements are true? (Mark all that apply.)

oThe probabilities of interest are 20% and 80%.

oMarket trends, customer preferences, and competitors' behavior influence the state of nature that FADC must deal with.

oThe only options that FADC has are to invest now or in two years.

oThe outcomes of interest are a 20% increase in profit, an 80% decrease to profit, and no change to profit.

3.Suppose GH Enterprises is entering into a decision involving uncertainty.

One option management faces is the status quo, resulting in profits of $10,000 for the month.

The other option involves a new marketing campaign that is somewhat controversial. The publicity surrounding the campaign could either lead to increased profitability or decreased profitability. Past experience with similar approaches suggests that there is a 40% chance that profitability will increase and a 60% chance that profitability will decrease.

The estimated change to profitability as a result of the marketing campaign is 50% (in both the favorable and unfavorable directions).

What is the expected value of the outcome of implementing the new marketing campaign?

$13,000

$8,000

$9,000

$11,000

4.EAC, Inc. has collected information regarding past experiences involving predictive reports they have received in the past from consultants about uncertain situations.

The following is a synopsis of that data, where the rows represent the actual outcome experienced and the columns represent the predictions contained in the reports.

"Favorable" "Unfavorable" Success 0.3 0.1 Failure 0.3 0.3"Favorable" "Unfavorable" Success 0.3 0.1 Failure 0.3 0.3