MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Figure 1 1) Given this decision tree, node 2 represents 1) A) the optimal solution. B) a state of nature. C) an alternative. D) a non-optimal solution. 2) A plant manager considers the operational cost per hour of five machine alternatives. The cost per 2) hour is sensitive to three potential weather conditions: cold, mild, and warm. The following table represents the operations cost per hour for each alternative-state of nature combination: States of Nature Weather related cost per hour Alternatives Cold cost/day Mild cost/day Warm cost/day Machine 1 $50 $40 $45 Machine 2 $45 $42 $47 Machine 3 $40 $35 $54 Machine 4 $60 $25 $48 Machine 5 $45 $40 $45 Using the pessimistic criterion, which alternative is best? A) Machine 2 B) Machine 3 C) Machine 4 D) Machine 5 3) Which of the following is true about the expected value of perfect information? 3) A) It is the amount you would pay for any sample study. B) It is calculated as expected value with perfect information minus maximum EMV. C) It is calculated as EMV minus EOL. D) It is the amount charged for marketing research. 4) The Hurwicz criterion coefficient of realism measures the decision maker's degree of 4) A) certainty. B) utility. C) pessimism. D) optimism. 5) The Hurwicz criterion is also called the criterion of 5) A) regret. B) equality. C) realism. D) optimism.6) The following is a payoff table giving profits for various situations. 6) States of Nature Alternatives A B C Alternative 100 120 180 Alternative 2 200 100 50 Alternative 3 20 140 120 Do Nothing The probabilities for states of nature A, B, and C are 0.3, 0.5, and 0.2, respectively. If a perfect forecast of the future were available, what is the expected value with this perfect information? A) 160 B) 130 C) 166 D) 36 7) The equally likely criterion is also called the criterion. A) uncertainty B) LaFlore C) Hurwicz D) Laplace 8) Nick has plans to open some pizza restaurants, but he is not sure how many to open. He has 8) prepared a payoff table to help analyze the situation. States of Nature Alternatives Good Fair Poor Market Market Market Open 1 380,000 70,000 - 400,000 Open 2 200,000 80,000 - 200,000 Do Nothing As Nick does not know how his product will be received, he assumes that all three states of nature are equally likely to occur. If he uses the equally likely criterion, what decision would he make? A) Fair market B) Open 1 C) Good market D) Open 2 1 Figure 1 9) A decision analyst began to sketch this decision tree at 8:30 this morning and now is just returning 9) from her lunch break (she had the blue plate special and highly recommends it). If she resumes work on the decision tree at the point on the tree labeled 4, what is least likely to go there? A) a state of nature node B) a decision node C) a negative payoff D) a positive payoff 10) In the construction of decision trees, which of the following shapes represents a decision node? 10) A) square B) triangle C) diamond D) circle