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