 |
1 | |
The variance of a probability distribution is used to measure risk because a higher variance associated with... |
| | A) | a more compact distribution. |
| | B) | a wider spread of values around the mean. |
| | C) | a lower expected value. |
| | D) | both a and c |
| | E) | both b and c |
|
|
2 | |
When a manager can list all outcomes and assign probabilities to each, |
| | A) | the manager should use the maximin rule for decision making. |
| | B) | both risk and uncertainty exist. |
| | C) | risk exists. |
| | D) | uncertainty exists. |
| | E) | both a and d |
|
|
3 | |
Choosing the decision with the maximum possible payoff... |
| | A) | is the maximax rule. |
| | B) | ignores possible bad outcomes. |
| | C) | is a guide for decision making under uncertainty. |
| | D) | both b and d |
| | E) | all of the above |
|
|
4 | |
The maximin rule... |
| | A) | ignores bad outcomes. |
| | B) | is used by optimistic managers. |
| | C) | minimizes the potential regret. |
| | D) | chooses the maximum worst payoff. |
| | E) | none of the above |
|
|
5 | |
Using the minimax regret rule the manager makes the decision... |
| | A) | that has the highest expected value relative to the other decisions. |
| | B) | knowing he or she will not regret it. |
| | C) | with the largest worst-potential regret. |
| | D) | with the smallest worst-potential regret. |
|
|
6 | |
In making decisions under risk, |
| | A) | maximizing expected value is best for making repeated decisions with identical probabilities. |
| | B) | maximizing expected value is always the best rule. |
| | C) | the coefficient of variation rule is always best. |
| | D) | mean variance analysis is always the best rule. |
| | E) | none of the above |
|
|
7 | |
The next 5 questions refer to the following: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0070601607/124376/chap15_7.gif','popWin', 'width=633,height=236,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (4.0K)</a>]]>
Using the maximax rule, the decision maker would choose... |
| | A) | A. |
| | B) | B. |
| | C) | C. |
| | D) | impossible to say from the information given |
|
|
8 | |
Using the maximin rule, the decision maker would choose... |
| | A) | A. |
| | B) | B. |
| | C) | C. |
| | D) | impossible to tell from the information given |
| | E) | |
|
|
9 | |
Using the maximum expected value rule, the decision maker would choose... |
| | A) | A. |
| | B) | B. |
| | C) | C. |
| | D) | impossible to tell from the information given |
|
|
10 | |
Using the equal probability rule the decision maker would choose... |
| | A) | A. |
| | B) | B. |
| | C) | C. |
| | D) | impossible to tell from information |
|
|
11 | |
Using the minimax regret rule the decision maker would choose... |
| | A) | A. |
| | B) | B. |
| | C) | C. |
| | D) | impossible to tell from the information |
|
|
12 | |
The next 3 questions refer to the following table showing the probability distribution of payoffs from an activity. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0070601607/124376/chap15_12.gif','popWin', 'width=422,height=213,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]>
What is the expected value? |
| | A) | 21 |
| | B) | 36.5 |
| | C) | 40 |
| | D) | 42.5 |
| | E) | 46.5 |
|
|
13 | |
What is the variance of the distribution? |
| | A) | 20 |
| | B) | 152.8 |
| | C) | 195 |
| | D) | 273.5 |
| | E) | 469 |
|
|
14 | |
What is the coefficient of variation for this distribution? |
| | A) | 0.3 |
| | B) | 4.5 |
| | C) | 12.4 |
| | D) | 13.9 |
| | E) | 21.7 |
|
|
15 | |
If marginal benefits and marginal costs of an activity are risky and have a constant variance, expected net benefits are maximized when level of the activity is chosen so... |
| | A) | expected marginal benefits equal expected marginal cost and the decision maker must be risk neutral. |
| | B) | expected marginal benefits exceeds expected marginal cost by the largest amount. |
| | C) | expected marginal cost equals expected marginal benefits. |
| | D) | expected marginal benefits equal expected marginal cost and the decision maker is not risk loving. |
| | E) | both a and d |
|
|
16 | |
Answer the next five questions using the following information: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0070601607/124376/chap15_16.gif','popWin', 'width=642,height=388,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (7.0K)</a>]]>
What is the equation for expected marginal cost? |
| | A) | E (MC) = 18 − 0.03Q + 0.00002Q2 |
| | B) | E (MC) = 18Q − 0.06Q2 + 0.00009Q3 |
| | C) | E (MC) = 18 − 0.06Q + 0.00009Q2 |
| | D) | E (MC) = 18 − 0.02Q + 0.00002Q2 |
|
|
17 | |
What is the expected price? |
| | A) | $10.75 |
| | B) | $12.70 |
| | C) | $15 |
| | D) | $20 |
| | E) | $22.60 |
|
|
18 | |
What is the expected minimum average variable cost? Should the manager shut down? |
| | A) | $5.00; the manager should shut down because $5.00 is less than the expected price. |
| | B) | $7.80; the manager should not shut down since expected price is greater than $8.80. |
| | C) | $10.50; the manager should shut down because $10.50 is less than the expected price. |
| | D) | $10.50; the manager should not shut down since expected price is greater than $10.50. |
|
|
19 | |
What level of production maximizes expected profit? |
| | A) | 412 units |
| | B) | 562 units |
| | C) | 1,115 units |
| | D) | 1,281 units |
| | E) | 1,304 units |
|
|
20 | |
What is the expected profit? |
| | A) | $457 |
| | B) | $593 |
| | C) | $672 |
| | D) | $1,045 |
| | E) | $2,387 |
|