Quantitative Methods for Business 13th Edition David Anderson - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below True / False 1. The decision alternative with the best expected monetary value will always be the most desirable decision. a. True b. False …
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Quantitative Methods for Business 13th Edition David Anderson – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
| True / False |
1. The decision alternative with the best expected monetary value will always be the most desirable decision.
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2. When monetary value is not the sole measure of the true worth of the outcome to the decision maker, monetary value should be replaced by utility.
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3. The outcome with the highest payoff will also have the highest utility.
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4. Expected utility is a particularly useful tool when payoffs stay in a range considered reasonable by the decision maker.
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5. To assign utilities, consider the best and worst payoffs in the entire decision situation.
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6. A risk avoider will have a concave utility function.
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7. The expected utility is the utility of the expected monetary value.
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8. The risk premium is never negative for a conservative decision maker.
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9. The risk neutral decision maker will have the same indications from the expected value and expected utility approaches.
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10. The utility function for a risk avoider typically shows a diminishing marginal return for money.
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11. A game has a pure strategy solution when both players’ single-best strategies are the same.
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12. A game has a saddle point when pure strategies are optimal for both players.
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13. A game has a saddle point when the maximin payoff value equals the minimax payoff value.
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14. The logic of game theory assumes that each player has different information.
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15. With a mixed strategy, the optimal solution for each player is to randomly select among two or more of the alternative strategies.
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16. The expected monetary value approach and the expected utility approach to decision making usually result in the same decision choice unless extreme payoffs are involved.
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17. A risk neutral decision maker will have a linear utility function.
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18. Given two decision makers, one risk neutral and the other a risk avoider, the risk avoider will always give a lower utility value for a given outcome.
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19. Generally, the analyst must make pairwise comparisons of the decision strategies in an attempt to identify dominated strategies.
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20. When the payoffs become extreme, most decision makers are satisfied with the decision that provides the best expected monetary value.
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21. Any 2 X 2 two-person, zero-sum, mixed-strategy game can be solved algebraically.
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22. A dominated strategy will never be selected by the player.
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| Multiple Choice |
23. When consequences are measured on a scale that reflects a decision maker’s attitude toward profit, loss, and risk, payoffs are replaced by
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24. The purchase of insurance and lottery tickets shows that people make decisions based on
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25. The expected utility approach
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26. Utility reflects the decision maker’s attitude toward
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27. Values of utility
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28. If the payoff from outcome A is twice the payoff from outcome B, then the ratio of these utilities will be
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29. The probability for which a decision maker cannot choose between a certain amount and a lottery based on that probability is
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30. A decision maker has chosen .4 as the probability for which he cannot choose between a certain loss of 10,000 and the lottery p(−25000) + (1 − p)(5000). If the utility of −25,000 is 0 and of 5000 is 1, then the utility of −10,000 is
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31. When the decision maker prefers a guaranteed payoff value that is smaller than the expected value of the lottery, the decision maker is
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32. A decision maker whose utility function graphs as a straight line is
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33. For a game with an optimal pure strategy, which of the following statements is false?
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34. Which of the following statements about a dominated strategy is false?
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35. A 3 x 3 two-person zero-sum game that has no optimal pure strategy and no dominated strategies
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36. For a two-person zero-sum game, which one of the following is false?
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37. If the maximin and minimax values are not equal in a two-person zero-sum game,
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38. If it is optimal for both players in a two-person, zero-sum game to select one strategy and stay with that strategy regardless of what the other player does, the game
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39. For a two-person, zero-sum, mixed-strategy game, each player selects its strategy according to
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40. When the utility function for a risk-neutral decision maker is graphed (with monetary value on the horizontal axis and utility on the vertical axis), the function appears as
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41. If a game larger than 2 X 2 requires a mixed strategy, we attempt to reduce the size of the game by
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42. To select a strategy in a two-person, zero-sum game, Player A follows a ______ procedure and Player B follows a ______ procedure.
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| Subjective Short Answer |
43. For the payoff table below, the decision maker will use P(s1) = .15, P(s2) = .5, and P(s3) = .35.
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44. A decision maker who is considered to be a risk taker is faced with this set of probabilities and payoffs
For the lottery p(80) + (1 − p)(−50), this decision maker has assessed the following indifference probabilities
Rank the decision alternatives on the basis of expected value and on the basis of expected utility.
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45. Three decision makers have assessed utilities for the problem whose payoff table appears below.
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46. A decision maker has the following utility function
What is the risk premium for the payoff of 50?
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47. Determine decision strategies based on expected value and on expected utility for this decision tree. Use the utility function
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48. Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy. The fire statistics indicate that in a given year the probability of property damage in a fire is as follows:
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49. Super Cola is considering the introduction of a new 8 oz. root beer. The probability that the root beer will be a success is believed to equal .6. The payoff table is as follows:
Company management has determined the following utility values:
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50. Chez Paul is contemplating either opening another restaurant or expanding its existing location. The payoff table for these two decisions is:
Paul has calculated the indifference probability for the lottery having a payoff of $160,000 with probability p and −$80,000 with probability (1−p) as follows:
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51. The Dollar Department Store chain has the opportunity of acquiring either 3, 5, or 10 leases from the bankrupt Granite Variety Store chain. Dollar estimates the profit potential of the leases depends on the state of the economy over the next five years. There are four possible states of the economy as modeled by Dollar Department Stores and its president estimates P(s1) = .4, P(s2) = .3, P(s3) = .1, and P(s4) = .2. The utility has also been estimated. Given the payoffs (in $1,000,000’s) and utility values below, which decision should Dollar make?
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52. Consider the following two-person zero-sum game. Assume the two players have the same two strategy options. The payoff table shows the gains for Player A.
Determine the optimal strategy for each player. What is the value of the game?
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53. Consider the following two-person zero-sum game. Assume the two players have the same three strategy options. The payoff table below shows the gains for Player A.
Is there an optimal pure strategy for this game? If so, what is it? If not, can the mixed-strategy probabilities be found algebraically? What is the value of the game?
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| 54. Suppose that there are only two vehicle dealerships (A and B) in a small city. Each dealership is considering three strategies that are designed to take sales of new vehicles from the other dealership over a period of four months. The strategies, assumed to be the same for both dealerships, are:
Strategy 1: Offer a cash rebate on a new vehicle. The payoff table (in number of new vehicle sales gained per week by Dealership A (or lost by Dealership B) is shown below.
Identify the pure strategy for this two-person zero-sum game. What is the value of the game?
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55. Consider the following two-person zero-sum game. Assume the two players have the same two strategy options. The payoff table shows the gains for Player A.
Determine the optimal strategy for each player. What is the value of the game?
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56. Consider the following two-person zero-sum game. Assume the two players have the same three strategy options. The payoff table shows the gains for Player A.
Is there an optimal pure strategy for this game? If so, what is it? If not, can the mixed-strategy probabilities be found algebraically?
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57. Consider the following two-person zero-sum game. Assume the two players have the same three strategy options. The payoff table below shows the gains for Player A.
Is there an optimal pure strategy for this game? If so, what is it? If not, can the mixed-strategy probabilities be found algebraically? What is the value of the game?
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| 58. Two banks (Franklin and Lincoln) compete for customers in the growing city of Logantown. Both banks are considering opening a branch office in one of three new neighborhoods: Hillsboro, Fremont, or Oakdale. The strategies, assumed to be the same for both banks, are:
Strategy 1: Open a branch office in the Hillsboro neighborhood. Values in the payoff table below indicate the gain (or loss) of customers (in thousands) for Franklin Bank based on the strategies selected by the two banks.
Identify the neighborhood in which each bank should locate a new branch office. What is the value of the game?
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| 59. Consider the following problem with four states of nature, three decision alternatives, and the following payoff table (in $’s):
The indifference probabilities for three individuals are:
a. Classify each person as a risk avoider, risk taker, or risk neutral. b. For the payoff of $400, what is the premium the risk avoider will pay to avoid risk? What is the premium the risk taker will pay to have the opportunity of the high payoff?
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| 60. Metropolitan Cablevision has the choice of using one of three DVR systems. Profits are believed to be a function of customer acceptance. The payoff to Metropolitan for the three systems is:
The probabilities of customer acceptance for each system are:
The first vice president believes that the indifference probabilities for Metropolitan should be:
The second vice president believes Metropolitan should assign the following utility values:
a. Which vice president is a risk taker? Which one is risk averse?
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61. Consider a two-person, zero-sum game where the payoffs listed below are the winnings for Player A. Identify the pure strategy solution. What is the value of the game?
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62. Consider a two-person, zero-sum game where the payoffs listed below are the winnings for Company X. Identify the pure strategy solution. What is the value of the game?
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63. Consider the following two-person, zero-sum game. Payoffs are the winnings for Company X. Formulate the linear program that determines the optimal mixed strategy for Company X.
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64. Shown below is the solution to the linear program for finding Player A’s optimal mixed strategy in a two-person, zero-sum game.
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| Essay |
65. When and why should a utility approach be followed?
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66. Give two examples of situations where you have decided on a course of action that did not have the highest expected monetary value.
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67. Explain how utility could be used in a decision where performance is not measured by monetary value.
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68. Explain the relationship between expected utility, probability, payoff, and utility.
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69. Draw the utility curves for three types of decision makers, label carefully, and explain the concepts of increasing and decreasing marginal returns for money.
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70. Game theory models extend beyond two-person, zero-sum games. Discuss two extensions (or variations).
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Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
