BUS 461 WEEK 4 QUIZ I

BUS 461 WEEK 4 QUIZ I
1	Question 	The principle of insufficient reason indicates the decision makers belief that any state of nature is as likely to occur as any other state.

	 	  True 
 			  False 

				

 	
Question 2.	Question :	The indifference approach for assigning utility values asks the decision maker which of two alternatives is preferred: the payoff under consideration or a chance at the highest payoff with a risk of the lowest payoff.

 	 	  True 
 		 	  False 

				

 	


Question 3.	Question :	The fact that so many people enter sweepstakes and/or buy lottery tickets demonstrates the difference between:

 	 	  the expected value and the expected utility criteria. 

 			  altruism and selfishness. 

 			  risk aversion and risk indifference. 

 			  certainty and uncertainty. 



 	


Question 4.	Question :	If it is assumed that each possible state of nature has an equal likelihood of occurrence, the expected value criterion will yield the same result as:

	  maximin. 

 			  minimax 

 			  maximax 

 		 	  the principle of insufficient reason. 



 	


Question 5.	Question :	The expected value of perfect information (EVPI):

 		  is the same as the expected return with perfect information (ERPI). 

 		 	  is never less than the expected value of sample information (EVSI). 

 			  does not require probabilities in its calculation. 

 			  requires the availability of sample information. 



 	


Question 6.	Question :	An aggressive decision maker would prefer the minimax regret criterion over the maximin criterion.

 		  True 
 		 	  False 

				

 	
Question 7.	Question :	The states of nature in a payoff table should be mutually exclusive and collectively exhaustive.

 	 	  True 
 			  False 

				

 	


Question 8.	Question :	Utilities are generally well approximated by monetary payoffs for:

 	  risk-averse individuals. 

 		 	  risk-preferring individuals. 

 			  small businesses. 

 		 	  large corporations. 



 	


Question 9.	Question :	Consider the payoff table in chapter 6 problem 7 (page 376). The optimal decision under the maximin criterion is:

 	  D1 

 			  D2 

 			  D3 

 			  D4 



 	


Question 10.	Question :	The payoff table always has more states of nature than decision alternatives.

 		  True 
 		 	  False