# Brs Mdm3 Tif Ch08

Chapter 8 Decision Analysis

8.1 Chapter Questions

1) Determining the best payoff for each alternative and choosing the alternative with the "best of the best" is the approach called:

A) maximax

B) maximin

C) Laplace

D) minimax regret

E) expected monetary value

Answer: A

Page Ref: 323

Topic: Decision Making Under Uncertainty

Difficulty: Moderate

2) Determining the worst payoff for each alternative and choosing the alternative with the "best of the worst" is the approach called:

A) maximax

B) maximin

C) Laplace

D) minimax regret

E) expected monetary value

Answer: B

Page Ref: 323

Topic: Decision Making Under Uncertainty

Difficulty: Moderate

3) The approach that is used for analyzing decision trees is called:

A) maximax

B) maximin

C) Laplace

D) minimax regret

E) expected monetary value

Answer: E

Page Ref: 332

Topic: Decision Trees

Difficulty: Easy

4) Determining the average payoff for each alternative and choosing the one with the best payoff is the approach called:

A) maximax

B) maximin

C) Laplace

D) minimax regret

E) expected monetary value

Answer: C

Page Ref: 324

Topic: Decision Making Under Uncertainty

Difficulty: Moderate

Use this information to answer the following questions.

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

5) Refer to the payoff table. Using the maximax criterion, what would be the highest expected payoff?

A) $145

B) $124

C) $120

D) $110

E) $100

Answer: A

Page Ref: 323

Topic: Decision Making Under Uncertainty

Difficulty: Moderate

AACSB: Analytic Skills

6) Refer to the payoff table. Using the maximin criterion, what would be the highest expected payoff?

A) $145

B) $125

C) $85

D) $75

E) $60

Answer: C

Page Ref: 323

Topic: Decision Making Under Uncertainty