Final Exam Exercise Questions - Part 1
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McMaster University *
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2KA3
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Communications
Date
Feb 20, 2024
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3
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1
Comm. 2DA3 –
Decision Making with Analytics –
Fall 2022 Final Exam Exercise Questions –
Part 1 1-8. A bakery must decide how many pies to prepare for the upcoming weekend. The bakery has the option to make 50, 100, or 150 pies. Unsold pies are donated to a nearby charity center for free. Each pie costs $5 to make and sells for $7. Refer to the information above. 1.
Which alternative should be chosen based on the Optimistic criterion? 2.
Which alternative should be chosen based on the Conservative criterion? 3.
Which alternative should be chosen based on the Minimax Regret criterion? Refer to the information above. Assume that, the following probability distribution for the demand is obtained from sales record: Demand 50 pies 100 pies 150 pies Probability 0.3 0.5 0.2 4.
The payoff for the number of pies baked of 100 and the demand of 150 is: a.
Less than $150 b. Greater than or equal to $150 and less than $180 c. Greater than or equal to $180 and less than $220 d. Greater than or equal to $220 5.
The expected payoff for the number of pies baked of 100 is: a.
Less than $55 b. Greater than or equal to $55 and less than $100 c. Greater than or equal to $100 and less than $125 d. Greater than or equal to $125 6.
The highest expected payoff is: a.
Less than or equal to $0 b. Greater than or equal to $0 and less than $60 c. Greater than or equal to $60 and less than $120 d. Greater than or equal to $120 7.
The expected value with perfect information, EVwPI, is: a.
Less than $200 b. Greater than or equal to $200 and less than $210 c. Greater than or equal to $210 and less than $220 d. Greater than or equal to $220 8.
The expected value of perfect information, EVPI, is: a.
Less than $50 b. Greater than or equal to $50 and less than $100 c. Greater than or equal to $100 and less than $150 d. Greater than or equal to $150
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9-12. A company estimates that its future demand is high (HD), moderate (MD) and low (LD) with the probabilities of 0.3, 0.5 and 0.2, respectively. The payoff table is given as Alternatives State of Nature HD MD LD Build Large Plant $200,000 $100,000 -$120,000 Build Small Plant $90,000 $50,000 -$20,000 Do Nothing $0 $0 $0 Now the company considers hiring a marketing research firm to do a study to determine whether the outlook for the future demand is positive or negative. Utilizing the historical data, it was identified that the probability of having a positive report is 57% and the probability of having a negative report is 43%. The cost of the study is $4K. The posterior probabilities for the different levels of demands in the possible report types are as following: Report outcome Positive Negative HD 0.509 0.023 MD 0.468 0.543 LD 0.023 0.434 Following is a partial skeleton of the decisions tree that you would get through TreePlan. Using this as reference, answer the following tree questions. ** Also, use the decision tree in the file “Lumber Company Decision Tree.xlsx” to answer the questions.
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9.
The expected monetary value EMV at node on the decision tree on the previous page is: a. Less than $60K b. Greater than or equal to $60K and less than $65K c. Greater than or equal to $65K and less than $70K d. Greater than or equal to $70K 10.
What number will be shown inside the event node next to after folding back the tree? a. 1 b. 3 c. 2 d. 4 11.
What is the expected value of sample information? a. $1961 b. $2000 a. $86961 b. $2039 12. After analyzing the decision tree, which of the decision would you choose as the decision maker? a. Conduct the Survey b. Do not conduct the survey
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