Question 91) If one’s utility curve is not a straight line (i.e., risk indiffere

91) If one’s utility curve is not a straight line (i.e., risk indifferent), then one’s utility can, over a particular range of EMV,

A) increase at an increasing rate as the monetary value increases.

B) increase at an increasing rate as the monetary value decreases.

C) increase at a decreasing rate as the monetary value increases.

D) increase at a decreasing rate as the monetary value decreases.

E) Any of the above

92) It is sometimes said that, “Those who gamble the most are the ones who can least afford to lose.” These people gamble because

A) the EMV is positive.

B) the EMV is negative.

C) the gambler has no family to consider if he/she dies.

D) there is utility other than monetary to consider.

E) None of the above

93) A manager is deciding whether or not to build a small facility. Demand is uncertain and can be either at a high or low level. If the manager chooses a small facility and demand is low, the payoff is $300. If the manager chooses a small facility and demand is high, the payoff is $100. On the other hand, if the manager chooses a large facility and demand is low, the payoff is -$200, but if demand is high, the payoff is $800.

(a) What would be the best decision based on the maximax criterion?

(b) What would be the best decision based on the maximin criterion?

(c) What would be the best decision based on the minimax regret?

94) A manager is deciding whether or not to build a small facility. Demand is uncertain and can be either at a high or low level. If the manager chooses a small facility and demand is low, the payoff is $100. If the manager chooses a small facility and demand is high, the payoff is $300. On the other hand, if the manager chooses a large facility and demand is low, the payoff is -$200, but if demand is high, the payoff is $800.

(a) What would be the best decision based on the Laplace criterion?

(b) What would be the best decision based on Hurwicz’s criterion of realism using ? = 0.6?

95) A concessionaire for the local ballpark has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd).

If the probabilities associated with the states of nature are 0.30 for a large crowd, 0.50 for an average crowd, and 0.20 for a small crowd, determine:

(a) the alternative that provides the greatest expected monetary value (EMV)

(b) the expected value of perfect information (EVPI)

96) A concessionaire for the local ballpark has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd).

If the probabilities associated with the states of nature are 0.30 for a large crowd, 0.50 for an average crowd, and 0.20 for a small crowd, determine:

(a) the opportunity loss table.

(b) minimum expected opportunity loss (EOL).

97) A manager needs to hire short-term employees to meet production demands. The manager would like to hire one of three possible short-term workers.

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