Chapter 21: Decision Analysis

States of nature are defined so that how many of the possible states of nature will occur?
1. 1
2. 2
3. 3
4. 4
5. The answer depends on the particular problem.
In decision analysis, we refer to the consequence resulting from a specific combination of a decision alternative and a state of nature as a
1. branch
2. consequence
3. node
4. payoff
A table showing payoffs for all combinations of decision alternatives and states of nature is called
1. a chance node
2. an expected value
3. a payoff table
4. a posterior probability
When formulating a problem, the uncertain future events are called
1. chance events
2. consequences
3. payoffs
4. states of nature
The possible outcomes for a chance event are referred to as
1. consequences
2. expected values
3. payoffs
4. states of nature
Payoffs can be expressed in terms of
1. cost
2. time
3. profit
4. all of the choices are correct
5. none of the choices are correct
In order to graphically show the sequential nature of the decision making process, one could use
1. a decision tree
2. the expected value approach
3. joint probabilities
4. perfect information
In order to determine the probabilities for the states of nature, one may use the
1. classical method
2. relative frequency method
3. subjective method
4. All of the choices are correct
A probability for a state of nature may be negative as long as the probabilities for all of the states of nature sum to one.
1. True
2. False
The expected profit may be negative
1. True
2. False