12/7/23, 10:36 AM Decision Theory

NAME :

CLASS :
Decision Theory
DATE :
20 Questions

1. 2. ------ table is also known as profit table

A min B cost

C payoff D loss

2. 3. -------is also known as Opportunity loss table.

A cost table B min table

C Regret table D Profit table

3. 4. All possible outcomes that must be considered in the decision are ------

A loss B events

C action D profit

4. 5. Decision maker has control over these actions,.

A TRUE B FALSE

5. 7..-------- criterion, is known as the criterion of optimism.

A minimax criteria B maximax criteria

C hurwicz criteria D maximin criteria

6. 8. -----criterion, also known as the criterion of pessimism.

A maximax criteria B hurwicz criteria

C minimax criteria D maximin criteria

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12/7/23, 10:36 AM Decision Theory

7. 10..------- criteria assumes equal probability of each event

A laplace criteria B maximax criteria

C maximin criteria D hurwicz criteria

8. 11.. In -------- the conditional value of each event in the pay-off table is multiplied by
its probability and the product is summed up.

A EOL B EMV

C EPPS D EVPI

9. 12.. The difference between the greater payoff and actual payoff is known as -------
--

A EMV B EOL

C EVPI D EPPS

10. 14.. ------------ is a managerial tool that presents all the decision alternatives and
outcomes in a flowchart type of diagram.

A DECISION TABLE B ALL OF ABOVE

C DECISION ROLL D DECISION TREE

11. A decision tree starts with a ____ to be made and the options that can be taken.

A payback period estimate B net present value assumption

C dividend D decision

12. BENEFITS OF USING DECISION TREES include:

Uses quantitative data only – ignores Assignment of probabilities and

A B
qualitative aspects of decisions expected values prone to bias

Probabilities are just estimates – Use of probabilities enables the “risk”

C D
always prone to error of the options to be addressed

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12/7/23, 10:36 AM Decision Theory

13. DRAWBACKS OF USING DECISION TREES include:

Easy to understand & tangible results It is a mathematical model used to

A B
help managers make decisions.

Likely costs are considered as well as Decision-making technique doesn’t

C D
potential benefits necessarily reduce the amount of risk

14. FInd the best decision using Maximax criterion on the

following table ∣∣

A A1 B A2

C A3

15. From the above decision find the optimum decision

A A2 B A1

16. FIndc the best decision using Laplace criterion

A A3 B A1

C A2

17. Find the best decision using maximin criterion

A A2 B A1

C A3

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12/7/23, 10:36 AM Decision Theory

18. Estimate the optimum expected monetary value and the

best decision

A Expected value= 205.0, Q B Expected value = 75, Poor

C Expected value = 37.5 GOOD D Expected value =75, P

E Expected value= 237.5, P

19. Find the best decision using Minimax regret criterion

A A1 B A2

C A3

20. Find the best decision using optimist criterion of decision

under uncertainty

A A1 B A2

C A3

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