Question 1

When TV advertisements report that “2 out of 3 dentists surveyed indicated they would recommend Brand X toothpaste to their patients,” an informed consumer may question the conclusion because:

A. the results were incorrectly computed.

B. dentists were not really surveyed.

C. the conclusion does not include the total number of dentists surveyed.

D. the conclusion is not illustrated with a graph.

Question 2

The main purpose of descriptive statistics is to:

A. summarize data in a useful and informative manner.

B. make inferences about a population.

C. determine if the data adequately represents the population.

D. gather or collect data.

Question 3

A poll of 1,000 voters used to predict the outcome of a statewide election is an example of:

A. descriptive statistics.

B. continuous variable measurement.

C. statistical inference.

D. deductive statistics.

Question 4

The number of fishing boats shipped from a manufacturer to a dealer each month is described as a:

A. random variable.

B. qualitative variable.

C. discrete variable.

D. continuous variable.

Question 5

The kinds of numbers that can take on any value, either a fraction or integer, between specified limits are called:

A. random variables.

B. qualitative variables.

C. discrete variables.

D. continuous variables.

Question 6

Which of the following is an example of a qualitative variable?

A. Number of children in a family

B. Weight of a person

C. Color of ink in a pen

D. Miles between oil changes

Question 7

Data obtained on the preferences of different religious groups for specific types of network television programming is an example of:

A. random variables.

B. qualitative variables.

C. discrete variables.

D. continuous variables.

Question 8

__________ level data are mutually exclusive and exhaustive, and categories are scaled according to the amount of the characteristic they possess, and zero represents a point on the scale.

A. Nominal

B. Ordinal

C. Interval

D. Ratio

Question 9

A bank asks customers to evaluate the drive-through service as good, average, or poor. Which level of measurement does this classification illustrate?

A. Nominal

B. Ordinal

C. Interval

D. Ratio

Question 10

Information can be misrepresented:

A. through misleading charts and graphs.

B. by reporting of an association of variables as causation.

C. by presenting average data that misrepresents sample or population data.

D. All of the above

Question 11

The _________ level of measurement presumes that one classification is ranked higher than another.

A. nominal

B. ordinal

C. interval

D. ratio

Question 12

_________ data are usually summarized in graphs and bar charts.

A. Qualitative

B. Quantitative

C. Continuous

D. Discrete

Question 13

Data can be classified according to:

A. discrete variables.

B. continuous variables.

C. attributes.

D. levels of measurement.

Question 14

A _________ is the total collection of individuals or objects.

A. data set

B. sample

C. population

D. grouping

Question 15

An example of the _________ level of measurement is temperature.

A. nominal

B. ordinal

C. interval

D. ratio

Question 16

With the _________ level of measurement, the data are sorted into categories with no particular order to the categories.

A. nominal

B. ordinal

C. interval

D. ratio

Question 17

The _________ level is the “highest” level of measurement.

A. nominal

B. ordinal

C. interval

D. ratio

Question 18

Another term for an attribute is a _________ variable.

A. discrete

B. continuous

C. qualitative

D. quantitative

Question 19

_________ involve(s) making estimates about a population based on sample results.

A. Inferential statistics

B. Determinant statistics

C. Statistical sampling

D. Statistical analysis

Question 20

With _________ level data, the data classifications are scaled according to the amount of the characteristic they possess.

A. nominal

B. ordinal

C. interval

D. ratio

Question 1

A student was interested in the cigarette smoking habits of college students and collected data from an unbiased random sample of students. The data is summarized in the following table:

Males Surveyed 50 Females Surveyed 75

Males Who Smoke 20 Females Who Smoke 25

Males Who Do Not Smoke 30 Females Who Do Not Smoke 50

Why is the table NOT a frequency distribution?

A. The number of males does not equal the sum of males that smoke and do not smoke.

B. The classes are not mutually exclusive.

C. There are too many classes.

D. Class limits cannot be computed.

Question 2

The main purpose of descriptive statistics is to:

A. data in a useful and informative manner.

B. make inferences about a population.

C. determine if the data adequately represents the population.

D. gather or collect data.

Question 3

A poll of 1,000 voters used to predict the outcome of a statewide election is an example of:

A. descriptive statistics.

B. continuous variable measurement.

C. statistical inference.

D. deductive statistics.

Question 4

The number of fishing boats shipped from a manufacturer to a dealer each month is described as a:

A. random variable.

B. qualitative variable.

C. discrete variable.

D. continuous variable.

Question 5

The kinds of numbers that can take on any value, either a fraction or integer, between specified limits are called:

A. random variables.

B. qualitative variables.

C. discrete variables.

D. continuous variables.

Question 6

Which of the following is an example of a qualitative variable?

A. Number of children in a family

B. Weight of a person

C. Color of ink in a pen

D. Miles between oil changes

Question 7

Data obtained on the preferences of different religious groups for specific types of network television programming is an example of:

A. random variables.

B. qualitative variables.

C. discrete variables.

D. continuous variables.

Question 8

__________ level data are mutually exclusive and exhaustive, and categories are scaled according to the amount of the characteristic they possess, and zero represents a point on the scale.

A. Nominal

B. Ordinal

C. Interval

D. Ratio

Question 9

A bank asks customers to evaluate the drive-through service as good, average, or poor. Which level of measurement does this classification illustrate?

A. Nominal

B. Ordinal

C. Interval

D. Ratio

Question 10

Information can be misrepresented:

A. through misleading charts and graphs.

B. by reporting of an association of variables as causation.

C. by presenting average data that misrepresents sample or population data.

D. All of the above

Question 11

The first procedure we use to describe a data set is:

A. differentiation.

B. classification.

C. data correlation.

D. frequency distribution.

Question 12

The number of observations in each class is called the:

A. data set

B. class size

C. class frequency

D. class interval

Question 13

Which of the following is not a step used to organize data into a frequency distribution?

A. decide on the number of classes.

B. determine the class interval.

C. prepare the raw data.

D. set the individual class limits.

Question 14

The _________ can be computed by adding the lower class limit to the upper class limit and dividing by 2.

A. class midpoint

B. class interval

C. class mark

D. class size

Question 15

A set of data consists of 38 observations. How many classes would you recommend for the frequency distribution?

A. 4

B. 5

C. 6

D. 8

Question 16

A _________ is especially useful for depicting nominal level data.

A. bar chart

B. line chart

C. histogram

D. pie chart

Question 17

A set of data consists of 230 observations between $235 and $567. What class interval would you recommend?

A. 15

B. 25

C. 45

D. 50

Question 18

Both the _________ and the _________ allow us to get a quick picture of the main characteristics of the data.

A. frequency distribution chart, polygraph

B. histogram, frequency polygon

C. pie chart, line chart

D. horizontal bar chart, vertical bar chart

Question 19

A set of data consists of 83 observations. How many classes would you recommend for the frequency distribution?

A. 5

B. 6

C. 7

D. 8

Question 20

A stem-and-leaf display is an alternative to a:

A. histogram

B. frequency distribution

C. frequency polygon

D. horizontal bar chart

Question 1

A quality control officer samples the number of adjustments on 10 machines over the course of a week in order to estimate the total number of adjustments on all machines in a factory. This is an example of a(n):

A. population mean.

B. sample mean.

C. arithmetic mean.

D. weighted mean.

Question 2

A clerk records the number of daily responses to a mail survey in one week. The response totals were 7, 17, 22, 12, 23, 20, more than 25. What is the arithmetic mean of the data set?

A. 14.43

B. 16.83

C. 18

D. Not calculable with the given data set.

Question 3

What is the mean weight of a sample of largemouth bass caught in a lake with weights of 2 lbs., 2 lbs., 3 lbs., 6 lbs., 8 lbs, and 8 lbs.?

A. 3.17 lbs.

B. 4.75 lbs.

C. 4.83 lbs.

D. Not calculable with the given data set

Question 4

The arithmetic mean:

A. is a unique number for any data set.

B. is always the most representative measure of central tendency for any given data set.

C. is the only measure of location where the sum of the deviations of each value from the mean will always be zero.

D. Both A and C

Question 5

Merchandise inventory purchases for a firm for a three-month period are: January: 2,000 units @ $12 per unit; February: 1,800 @ $14 per unit; March 2,600 units @ 15 per unit. What is the mean unit cost of merchandise inventory?

A. $12.82

B. $13.33

C. $13.78

D. $14.00

Question 6

One advantage of the median as a measure of central tendency is:

A. the possibility of more than one median existing for a given data set.

B. its usefulness for comparing two or more data sets.

C. its usefulness for describing nominal data sets.

D. that it is not affected by extreme values in the data set.

Question 7

The median:

A. usually appears twice in a data set.

B. cannot be computed from a frequency distribution.

C. can be computed for all levels of data.

D. is the midpoint of values in a distribution that is ordered from the smallest to the largest.

Question 8

From the data set 14, 16, 17, 18, 20, what is the mode?

A. 16.5

B. 17

C. 5

D. There is no mode for this data set.

Question 9

To measure the average percentage population increase in a state over a census period, a statistician should use the:

A. geometric mean.

B. arithmetic mean.

C. harmonic mean.

D. median.

Question 10

What is the geometric mean of the following sequence? 8, 8, 12, 14, 22, 16, 20

A. 13.35

B. 14

C. 14.5

D. 16

Question 11

Please answer questions 11-13 using the following data.

Sales Number of Retailers

100 up to 120 5

120 up to 140 7

140 up to 160 9

160 up to 180 16

180 up to 200 10

200 up to 220 3

What is the mean sales level?

A. 160

B. 160.7

C. 161.20

D. 170

Question 12

Based on the information in the chart in #11 (above), what is the median sales level?

A. 155

B. 165

C. 168

D. 170

Question 13

Based on the information in the chart in #11 (above), what is the modal observation?

A. 150

B. 160

C. 170

D. 180

Question 14

The mean of a data set is 42, the mode is 36, and the median value is 40. The data set is:

A. positively skewed.

B. negatively skewed.

C. a symmetrical distribution.

D. No determination on the skewness of the data set can be made without additional information.

Question 15

Sometimes, data has two values that have the highest and equal frequencies. In this case, the distribution of the data can best be summarized as:

A. symmetrical.

B. bimodal (having two modes).

C. positively skewed.

D. negatively skewed.

Question 16

What is the relationship between the mean and median in a negatively skewed distribution?

A. The mean is less than the median.

B. The median is less than the mean.

C. The geometric mean is higher than the median.

D. They are symmetrical with respect to one another.

Question 17

A distribution that has the same shape on either side of the center is said to be:

A. positively skewed.

B. negatively skewed.

C. symmetrical.

D. central.

Question 18

What is the relationship among the mean, median, and mode in a symmetric distribution?

A. They are all equal.

B. The mean is always the smallest value.

C. The median is always the largest value.

D. The mode is always the largest value.

Question 19

A negatively skewed distribution indicates that:

A. the distribution is not symmetrical.

B. the long tail is to the right.

C. the long tail is to the left.

D. Both A and C

Question 20

The weekly sales from a sample of ten computer stores yielded a mean of $25,900; a median $25,000 and a mode of $24,500. What is the shape of the distribution?

A. Symmetrical

B. Positively skewed

C. Negatively skewed

D. Bi-modal

Question 1

A quality control officer samples the number of adjustments on 10 machines over the course of a week in order to estimate the total number of adjustments on all machines in a factory. This is an example of a(n):

A. population mean.

B. sample mean.

C. arithmetic mean.

D. weighted mean.

Question 2

A clerk records the number of daily responses to a mail survey in one week. The response totals were 7, 17, 22, 12, 23, 20, more than 25. What is the arithmetic mean of the data set?

A. 14.43

B. 16.83

C. 18

D. Not calculable with the given data set.

Question 3

What is the mean weight of a sample of largemouth bass caught in a lake with weights of 2 lbs., 2 lbs., 3 lbs., 6 lbs., 8 lbs, and 8 lbs.?

A. 3.17 lbs.

B. 4.75 lbs.

C. 4.83 lbs.

D. Not calculable with the given data set

Question 4

The arithmetic mean:

A. is a unique number for any data set.

B. is always the most representative measure of central tendency for any given data set.

C. is the only measure of location where the sum of the deviations of each value from the mean will always be zero.

D. Both A and C

Question 5

Merchandise inventory purchases for a firm for a three-month period are: January: 2,000 units @ $12 per unit; February: 1,800 @ $14 per unit; March 2,600 units @ 15 per unit. What is the mean unit cost of merchandise inventory?

A. $12.82

B. $13.33

C. $13.78

D. $14.00

Question 6

One advantage of the median as a measure of central tendency is:

A. the possibility of more than one median existing for a given data set.

B. its usefulness for comparing two or more data sets.

C. its usefulness for describing nominal data sets.

D. that it is not affected by extreme values in the data set.

Question 7

The median:

A. usually appears twice in a data set.

B. cannot be computed from a frequency distribution.

C. can be computed for all levels of data.

D. is the midpoint of values in a distribution that is ordered from the smallest to the largest.

Question 8

From the data set 14, 16, 17, 18, 20, what is the mode?

A. 16.5

B. 17

C. 5

D. There is no mode for this data set.

Question 9

To measure the average percentage population increase in a state over a census period, a statistician should use the:

A. geometric mean.

B. arithmetic mean.

C. harmonic mean.

D. median.

Question 10

What is the geometric mean of the following sequence? 8, 8, 12, 14, 22, 16, 20

A. 13.35

B. 14

C. 14.5

D. 16

Question 11

Please answer questions 11-13 using the following data.

Sales Number of Retailers

100 up to 120 5

120 up to 140 7

140 up to 160 9

160 up to 180 16

180 up to 200 10

200 up to 220 3

What is the mean sales level?

A. 160

B. 160.7

C. 161.20

D. 170

Question 12

Based on the information in the chart in #11 (above), what is the median sales level?

A. 155

B. 165

C. 168

D. 170

Question 13

Based on the information in the chart in #11 (above), what is the modal observation?

A. 150

B. 160

C. 170

D. 180

Question 14

The mean of a data set is 42, the mode is 36, and the median value is 40. The data set is:

A. positively skewed.

B. negatively skewed.

C. a symmetrical distribution.

D. No determination on the skewness of the data set can be made without additional information.

Question 15

Sometimes, data has two values that have the highest and equal frequencies. In this case, the distribution of the data can best be summarized as:

A. symmetrical.

B. bimodal (having two modes).

C. positively skewed.

D. negatively skewed.

Question 16

What is the relationship between the mean and median in a negatively skewed distribution?

A. The mean is less than the median.

B. The median is less than the mean.

C. The geometric mean is higher than the median.

D. They are symmetrical with respect to one another.

Question 17

A distribution that has the same shape on either side of the center is said to be:

A. positively skewed.

B. negatively skewed.

C. symmetrical.

D. central.

Question 18

What is the relationship among the mean, median, and mode in a symmetric distribution?

A. They are all equal.

B. The mean is always the smallest value.

C. The median is always the largest value.

D. The mode is always the largest value.

Question 19

A negatively skewed distribution indicates that:

A. the distribution is not symmetrical.

B. the long tail is to the right.

C. the long tail is to the left.

D. Both A and C

Question 20

The weekly sales from a sample of ten computer stores yielded a mean of $25,900; a median $25,000 and a mode of $24,500. What is the shape of the distribution?

A. Symmetrical

B. Positively skewed

C. Negatively skewed

D. Bi-modal

Question 1

Measures of dispersion:

A. provide information that allow comparisons between the spreads of two or more distributions.

B. cannot be calculated for grouped data.

C. convey information on how the data is clustered around the median.

D. All of the above

Question 2

Please answer questions 2–7 using the following sample data.

13 29 41 60 89

14 26 53 7 14

What is the arithmetic mean of the data?

A. 34.6

B. 14

C. 50

D. 30.4

Question 3

Based on the information in the chart in #2 (above), what is the median of the data?

A. 27.5

B. 14

C. 34.6

D. 51

Question 4

Based on the information in the chart in #2 (above), what is the range of the data?

A. 14

B. 34.6

C. 82

D. 27.5

Question 5

Based on the information in the chart in #2 (above), what is the mean deviation of the data?

A. 0

B. 10.5

C. 20.9

D. 209

Question 6

Based on the information in the chart in #2 (above), what is the variance of the data?

A. 231

B. 616.2

C. 685.2

D. 1,197.2

Question 7

Based on the information in the chart in #2 (above), what is the standard deviation of the data?

A. 0.2

B. 24.83

C. 26.18

D. 34.61

Question 8

The coefficient of variation generally lies between:

A. -1 and +1.

B. -3 and +3.

C. 0% and 100%.

D. unlimited values.

Question 9

The mean of a data set is 20 and s = 2. According to Chebyshev’s theorem, what is the percentage of values that lie within 3 standard deviations of the mean?

A. 11.1%

B. 68%

C. 88.9%

D. 96%

Question 10

A non-normal population is determined to have a mean of 60 and a standard deviation of 4. Ninety-six percent of all observed values will occur in what range?

A. 52.16-67.84

B. 50-60

C. 48-72

D. 40-80

Question 11

A study of hours devoted to a graduate course outside of classroom time generates a mean score of 90 with a standard deviation . The mean age of the students was 31 with a standard deviation of 5 years. What is the relative dispersion of the two data sets?

A. 2.22%; 1.6%

B. 22.22%; 16.13%

C. 34.44%; 20%

D. Not calculable without additional data

Question 12

Based on the empirical rules, what percent of the observations in a data set will lie beyond two standard deviations above the mean?

A. 2.5%

B. 5%

C. 68%

D. 95%

Question 13

For a sample of engineers, the mean salary is $95,000 with a standard deviation of $30,000. The median value is $80,000. What is the relative shape of the distribution and coefficient of skewness?

A. Negatively skewed; -1.00

B. Negatively skewed; 1.00

C. Positively skewed; 1.50

D. Positively skewed; 3.00

Question 14

Please answer questions 14–16 using the following sample data.

13 29 41 60 89

14 26 53 7 14

What is the first quartile?

A. 11.5

B. 13.75

C. 37

D. 50.75

Question 15

Based on the information in the chart in #14 (above), what is the interquartile range?

A. 6

B. 39.5

C. 41

D. 44.25

Question 16

Based on the information in the chart in #14 (above), what is the 90th percentile?

A. 9.9

B. 55.5

C. 86.1

D. 89

Question 17

The interquartile range describes the:

A. lower 50% of observations.

B. lower 25% and upper 25% of observations.

C. middle 50% of observations.

D. upper 50% of observations

Question 18

A survey of passengers on domestic flights revealed these miles:

Miles Flown Number of Passengers

100 up to 500 16

500 up to 900 41

900 up to 1,300 81

1,300 up to 1,700 11

1,700 up to 2,100 9

2,100 up to 2,500 6

What is the range (in miles)?

A. 2,499

B. 1,100

C. 2,400

D. 1,999

Question 19

A box plot shows:

A. the mean and variance.

B. the relative symmetry of a distribution for a set of data.

C. the percentiles of a distribution.

D. the deciles of a distribution.

Question 20

What statistics are needed to draw a box plot?

A. Minimum, maximum, median, first, and third quartiles

B. Median, mean, and standard deviation

C. A mean and a dispersion

D. A mean and a standard deviation

5

Question 1

A collection of possible outcomes is know as a(n):

A. experiment.

B. probability.

C. event.

D. observation

Question 2

__________ requires the evaluation of available opinions and other information to produce estimates.

A. An experiment

B. An observation

C. Classical probability

D. Subjective probability

Question 3

The probability of selecting a red card from a fair deck of cards is:

A. a collectively exhaustive experiment.

B. an example of a mutually exclusive event.

C. an example of classical probability.

D. All of the above

Question 4

Events A and B are mutually exclusive. The probability of event A occurring is 0.15; the probability of event B occurring is 0.45. What is the probability that A or B will occur?

A. 0.30

B. 0.60

C. 1

D. 0.40

Question 5

Of 680 college students surveyed, 540 reported that they held a part-time job. What is the probability of selecting a student with a part-time job from this group?

A. 0.206

B. 0.485

C. 0.50

D. 0.794

Question 6

Please answer questions 6-8 based on the following information.

A student survey revealed the following data concerning employment status:

Class Level/Job status None Part-time Full-time

Freshman 16 52 12

Sophomore 4 26 20

Junior 8 18 34

Senoir 0 22 18

If one student is selected at random, what is the probability that the selected person is currently unemployed?

A. 0.122

B. 0.138

C. 0.348

D. 0.878

Question 7

Based on the information in the chart in #6 (above), if one student is selected at random, what is the probability that the selected person is a senior working full-time?

A. 0.078

B. 0.082

C. 0.214

D. 0.461

Question 8

Based on the information in the chart in #6 (above), if one student is selected at random, what is the probability that the selected person is a freshman employed on a part-time basis?

A. 0.104

B. 0.226

C. 0.356

D. 0.441

Question 9

P(A) = 0.40; P(B) = 0.25; the probability of both events occurring is 0.15. What is the probability of either event occurring?

A. 0.15

B. 0.50

C. 0.65

D. 0.80

Question 10

What is the probability of obtaining a “1” or a “2” on a single throw of a fair die?

A. 0.028

B. 0.167

C. 0.333

D. 0.50

Question 11

Events A and B are independent if:

A. event A occurs, therefore event B cannot occur.

B. event B can occur only if event A occurs.

C. the probability of event A is equal to the conditional probability of event A given B.

D. the probability of event A is less than the conditional probability of event A given B.

Question 12

For two independent events, if P(A)=3/8, and P(B)=8/9, what is P(A and B)?

A. 27/56

B. 1.317

C. 1/3

D. 46/100

Question 13

When two or more events can occur concurrently, it is known as:

A. independent probability.

B. conditional probability.

C. joint probability.

D. the special rule of addition.

Question 14

If P(A and B)=0.24 and P(A)=0.48, what is P(B|A)?

A. 0.1152

B. 0.5

C. 2.00

D. Not calculable without additional data.

Question 15

A prior probability is assigned to an event:

A. to determine joint probability.

B. to determine subjective probability.

C. for conditional probability problems.

D. when using Bayes’ theorem.

Question 16

A mortgage company has found that 2% of its mortgage holders default on their mortgage. Furthermore, 90% of those who default are late on at least two monthly payments over the life of their mortgage as compared to 45% of those who do not default. What is the probability that a mortgagee with two or more late monthly payments will default (using Bayes theorem)?

A. 0.018

B. 0.0226

C. 0.039

D. 0.441

Question 17

What is eight factorial (8!) equal to?

A. 40,320

B. 5,040

C. 8,000

D. 7! * 1!

Question 18

There are __________ permutations for selecting 6 items from a collection of 10 items.

A. 24

B. 210

C. 5,040

D. 151,200

Question 19

What is the number of ways in which 7 items can be taken 4 at a time, without regard to order?

A. 35

B. 210

C. 840

D. 720

Question 20

When selecting 4 of 9 possible candidates for a relay race, when specific order in the relay team matters, there are __________ possible team lineups.

A. 126

B. 630

C. 3,024

D. 15,210

6

Question 1

A firm is deciding whether or not to place a new product on the market. They envisage three possible market reactions: high demand, moderate demand, and low demand. If demand is strong they expect to sell $200,000 per month of the good; moderate sales levels are expected to be $100,000; low sales are estimated at $40,000. The firm’s alternatives are:

A. sell in high, moderate, or low quantities.

B. market the product or sell production rights to another firm.

C. to market or not to market the product.

D. None of the above

Question 2

In the scenario presented in #1 (above), the states of nature that the firm faces are:

A. $200,000, $100,000, and $40,000.

B. sell or don’t sell the product.

C. high demand, moderate demand, and low demand.

D. None of the above

Question 3

For the scenario presented in #1 (above), the firm’s payoff:

A. is $60,000.

B. is high, moderate, or low demand.

C. is $340,000.

D. is $200,000, $100,000, and $40,000, respectively.

Question 4

Please answer Questions 4-12 using the following information.

STATE

CHOICE I II

A $22,000 $15,000

B $20,000 $30,000

C $17,000 $34,000

The probability of state I occurring is 0.40, and the probability of state II occurring is 0.60. What is the expected monetary value of Choice B when State II occurs?

A. $ 7,200

B. $18,000

C. $25,000

D. $47,400

Question 5

Besides a payoff table, information can be organized using a:

A. decision tree.

B. scatter diagram.

C. fishbone.

D. Pareto chart.

Question 6

What is the most optimistic of all possible strategies?

A. Minimax

B. Maximax

C. Maximin

D. Minimax regret

Question 7

A maximax strategy will always choose the act or alternative that:

A. maximizes the expected monetary value.

B. minimizes the maximum regret or opportunity loss.

C. maximizes the potential payoff regardless of uncertainty.

D. guarantees a payoff for any state of nature.

Question 8

A maximin strategy will always choose the act or alternative that:

A. maximizes the expected monetary value.

B. minimizes the maximum regret or opportunity loss.

C. maximizes the potential payoff regardless of uncertainty.

D. guarantees a payoff for any state of nature.

Question 9

A minimax regret strategy will always choose the act or alternative that:

A. maximizes the expected monetary value.

B. minimizes the maximum regret or opportunity loss.

C. maximizes the potential payoff regardless of uncertainty.

D. guarantees a payoff for any state of nature.

Question 10

Based on the information in the chart in #4 (above), What is the expected monetary value of Choice C?

A. $23,600

B. $25,500

C. $27,200

D. $40,000

Question 11

Based on the information in the chart in #4 (above), the greatest expected payoff is represented by:

A. selecting Choice C.

B. selecting Choice C if expecting State I to occur.

C. State I occurring.

D. State II occurring.

Question 12

Based on the information in the chart in #4 (above), what is the opportunity loss of selecting Choice B when State II occurs?

A. $0

B. $4,000

C. $8,000

D. $10,000

Question 13

Based on the information in the chart in #4 (above), what is the expected opportunity loss of selecting Choice A?

A. $0

B. $6,000

C. $11,400

D. $19,000

Question 14

Based on the information in the chart in #4 (above), what is the expected opportunity loss of selecting Choice B?

A. $0

B. $3,200

C. $6,000

D. It depends on which state occurs.

Question 15

Based on the information in the chart in #4 (above), to minimize expected opportunity loss, we should select:

A. Choice A.

B. Choice B.

C. Choice C.

D. It depends on which state occurs.

Question 16

Based on the information in the chart in #4 (above), using a minimax regret strategy, we should select:

A. Choice A.

B. Choice B.

C. Choice C.

D. None of the above

Question 17

Another way of deciding which common stock to purchase is to determine the profit that might be lost because the exact state of nature (the market behavior) was not known at the time the investor bought the stock. This potential loss is called:

A. opportunity loss or regret.

B. negative state of nature.

C. minimization.

D. condition of uncertainty.

Question 18

Based on the information in the chart in #4 (above), what is the expected value of perfect information?

A. $2,000

B. $2,600

C. $4,200

D. $6,800

Question 19

The expected value of perfect information:

A. is equal to the expected value of conditions under certainty minus the optimal decision under uncertainty.

B. is the same as the minimum of the expected regrets.

C. is the dollar value of knowing the outcome of an event in advance.

D. All of the above

Question 20

Based on the information in the chart in #4 (above), for the purposes of building a decision tree, the value of $20,000 for Choice B given that State I occurs is:

A. a backward induced variable.

B. perfect information.

C. known as a conditional payoff.

D. the optimal decision strategy.