Question $1$

Saved

Consider the following payoff table that represents the profits earned for each alternative $($A$,$ B$,$ and C$)$ under the states of nature S$1,$ S$2,$ and S$3.$

S$1$ S$2$ S$3$

A $$60$ $$145$ $$120$

B $$75$ $$125$ $$110$

C $$95$ $$85$ $$130$

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

Question $1$ options:

$$103\mathrm{.}3$

$$120$

$$145$

$$108\mathrm{.}3$

$$125$

Question $2$

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 criterion of realism with alpha $=0\mathrm{.}8?$

Question $2$ options:

Make $50$ pies

Make $100$ pies

Make $150$ pies

Question $3$

ABC Inc. must make a decision on its current capacity for next year. Estimated profits $($in $$000$s$)$ 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 maximin criterion?

Question $3$ options:

Do nothing

Subcontract

Expand

Question $4$

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.

Refer to the information above. Assume that the bakery has obtained the following probability information regarding demand for the pies: P$(50)=0\mathrm{.}3,$ P$(100)=0\mathrm{.}5,$ and P$(150)=0\mathrm{.}2.$

What is the expected value under certainty?

Question $4$ options:

$280$

$190$

$0$

$90$

Question $5$

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\text{'}$s$)$ 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 Laplace criterion?

Question $5$ options:

Buy $3$ machines

Buy $2$ machines

Buy $1$ machine

Question $6$

Consider the following payoff table that represents the profits earned for each alternative $($A$,$ B$,$ and C$)$ under the states of nature S$1,$ S$2,$ and S$3.$

S$1$ S$2$ S$3$

A $$60$ $$145$ $$120$

B $$75$ $$125$ $$110$

C $$95$ $$85$ $$130$

What is the expected value of perfect information $($EVPI$)?$ Assume P$($S$1)=0\mathrm{.}5$ and P$($S$2)=0\mathrm{.}25.$

Question $6$ options:

$$20$

$$35$

$$11\mathrm{.}25$

$$0$

$$15$

Question $7$

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 maximax criterion?

Question $7$ options:

Make $100$ pies

Make $150$ pies

Make $50$ pies

Question $8$

The expected value of perfect information $($EVPI$)$ places a lower bound on how much a decision maker should be willing to pay to obtain perfect information.

Question $8$ options:

True

False

Question $9$

ABC Inc. must make a decision on its current capacity for next year. Estimated profits $($in $$000$s$)$ 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 maximax criterion?

Question $9$ options:

Subcontract

Expand

Do nothing