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Exam 20: Decision Analysis

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Question 1

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When working backward through a decision tree, the analyst should _____.

A) compute the expected value at each chance node
B) select the best chance branch at each chance node
C) select the best chance branch at each decision node
D) compute the expected value at each decision node

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Question 2

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The approach to determine the optimal decision strategy involves _____.

A) a forward (left to right) pass through the decision tree
B) a backward (right to left) pass through the decision tree
C) choosing the outcome of a chance event with the greatest probability
D) choosing the outcome of a chance event with the greatest payoff

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Question 3

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The expected value of information that would tell the decision maker exactly which state of nature is going to occur is the _____.

A posterior probability associated with sample information is of the form _____.

The expected opportunity loss of the best decision alternative is the _____.

Application of Bayes' theorem enables us to compute the _____.

A line or arc connecting the nodes of a decision tree is called a(n) _____.

Future events that cannot be controlled by the decision maker are called _____.

A tabular representation of the payoffs for a decision problem is a _____.

For a decision alternative, the weighted average of the payoffs is known as _____.

The probabilities for the states of nature must be _____.

The uncontrollable future events that can affect the outcome of a decision are known as _____.

Nodes indicating points where an uncertain event will occur are known as _____ nodes.

New information obtained through research or experimentation that enables an updating or revision of the state-of-nature probabilities is _____.

The difference between the expected value of an optimal strategy based on sample information and the "best" expected value without any sample information is called the _____ information.

The probability of one event given the known outcome of a (possibly) related event is known as _____ probability.

The probability of the states of nature, after use of Bayes' theorem to adjust the prior probabilities based on given indicator information, is called _____.

Prior probabilities are the probabilities of the states of nature _____.

A decision criterion that weights the payoff for each decision by its probability of occurrence is known as the _____.

In computing an expected value (EV) , the weights are _____.