Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)

Chapter 15 Quiz - Bayesian Statistics and Decision Analysis



1

The de Finetti game assesses:
A)personal probabilities
B)objective probabilities
C)gambling probabilities
D)game theory
E)none of the above
2

The utility function of a risk-averse person is:
A)concave
B)convex
C)straight line
D)s-shaped
E)none of the above
3

Suppose that you are sampling from a normal distribution with standard deviation 5. The population mean is assumed to be a random variable with mean 10 and standard deviation 3. A sample of size 100 gives a sample mean of 8. The posterior normal distribution of the population mean has a mean equal to:
A)8.05
B)8.01
C)9.95
D)9.99
E)none of the above
4

The basis of Bayesian analysis is the use of:
A)nonparametric statistics
B)prior information
C)very subjective probabilities
D)classical statistics
E)the binomial and the normal distributions
5

A manager is trying to choose between options A, B & C. The value of each option depends on the state of nature that occurs well after the choice has been made. The likelihood of the two possible states of nature and the payoffs for the individual options are in the following table:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070620164/235043/r15_5.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (7.0K)</a>
R-1 Ref 15-5

Suppose this manager is so pessimistic that he always chooses the option whose worst-case scenario is most attractive. In this situation, how much does the manager's pessimism cost him (in terms of expected value)?

A)If the manager follows his usual approach, in this case he will pass up $7,200 in expected monetary value
B)If the manager follows his usual approach, in this case he will pass up $10,200 in expected monetary value
C)If the manager follows his usual approach, in this case he will pass up $10,000 in expected monetary value
D)If the manager follows his usual approach, in this case he will pass up $20,000 in expected monetary value
E)Nothing, because his decision-making approach would, in this case at least, lead to the optimal choice (in terms of expected monetary value)
6

A manager is trying to choose between options A, B & C. The value of each option depends on the state of nature that occurs well after the choice has been made. The likelihood of the two possible states of nature and the payoffs for the individual options are in the following table:

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070620164/235043/r15_5.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (7.0K)</a>
R-1 Ref 15-5

In this situation, perfect information would be worth _____________ to this manager.

A)$ 50,000
B)$ 46,000
C)$ 29,200
D)$ 22,000
E)$ 16,800
7

A fast-food chain's internal process improvement consultant believes that the use of his techniques will reduce average response time (assume a normal distribution) to 80 seconds, with a standard deviation of 30 seconds. A local franchise owner has implemented these techniques and taken a random sample of 20 transactions. The average response time for the sampled transactions was 95 seconds, with a standard deviation of 10 seconds.
R-2 Ref 15-7

The posterior normal distribution for the mean response time after the implementation of these techniques has a mean equal to:

A)94.84
B)94.92
C)80.08
D)84.66
E)90.34
8

A fast-food chain's internal process improvement consultant believes that the use of his techniques will reduce average response time (assume a normal distribution) to 80 seconds, with a standard deviation of 30 seconds. A local franchise owner has implemented these techniques and taken a random sample of 20 transactions. The average response time for the sampled transactions was 95 seconds, with a standard deviation of 10 seconds.
R-2 Ref 15-7

The posterior normal distribution for the mean response time after the implementation of these techniques has a standard deviation equal to:

A)6.88
B)5.57
C)4.97
D)3.14
E)2.23
9

A fast-food chain's internal process improvement consultant believes that the use of his techniques will reduce average response time (assume a normal distribution) to 80 seconds, with a standard deviation of 30 seconds. A local franchise owner has implemented these techniques and taken a random sample of 20 transactions. The average response time for the sampled transactions was 95 seconds, with a standard deviation of 10 seconds.
R-2 Ref 15-7

The 95% HPD credible set for μ in this situation is:

A)[77.34, 97.57]
B)[73.74, 95.57]
C)[85.17, 104.66]
D)[90.55, 99.29]
E)[80.51, 109.43]
10

An occasional casino visitor has decided to switch games. In the past this visitor has played a game in which he has a 48% of winning $1 and a 52% chance of losing $1. If this visitor switches to a game that offers him only a 45% chance of winning $1, with a 55% chance of losing $1, this visitor is becoming more ____________ since his utility curve is increasingly _____________.
A)Risk-seeking; concave
B)Risk-avoiding; concave
C)Risk-seeking; convex
D)Risk-avoiding; convex
E)Risk-neutral; linear
11

A defendant in a lawsuit is trying to determine whether or not to offer a settlement to a plaintiff, and if a settlement is offered, how large a settlement to offer. An extensive review of similar cases leads the defendant to conclude that if the lawsuit goes to trial, the plaintiff has a probability of winning of 0.6. The typical jury award in such cases is $1,500,000. The defendant's legal team estimates that a settlement offer of $500,000 has a 0.3 probability of being accepted. If the settlement offer is rejected, the defendant could then choose to offer $800,000 – which would certainly be accepted – or go to trial. A final option under consideration is to simply offer the plaintiff $750,000 up front; the defendant's legal team estimates that such a large initial offer would certainly be accepted.
R-3 Ref 15-8

What is the expected cost to the defendant of taking this lawsuit to trial?

A)$ 3,000,000
B)$ 1,500,000
C)$ 900,000
D)$ 800,000
E)$ 750,000
12

A defendant in a lawsuit is trying to determine whether or not to offer a settlement to a plaintiff, and if a settlement is offered, how large a settlement to offer. An extensive review of similar cases leads the defendant to conclude that if the lawsuit goes to trial, the plaintiff has a probability of winning of 0.6. The typical jury award in such cases is $1,500,000. The defendant's legal team estimates that a settlement offer of $500,000 has a 0.3 probability of being accepted. If the settlement offer is rejected, the defendant could then choose to offer $800,000 – which would certainly be accepted – or go to trial. A final option under consideration is to simply offer the plaintiff $750,000 up front; the defendant's legal team estimates that such a large initial offer would certainly be accepted.
R-3 Ref 15-8

What is the optimal approach for this situation (from the defendant's perspective)?

A)Make an initial offer of $750,000
B)Make an initial offer of $500,000, and if this offer is rejected, make a subsequent settlement offer of $800,000
C)Make an initial offer of $500,000, and if this offer is rejected, take the lawsuit to trial
D)Make no settlement offer and take this lawsuit to trial
E)Either A or C are optimal approaches





To learn more about the book this website supports, please visit its Information Center.
(c)2006 Tata McGraw-Hill
Any use is subject to the Terms of Use and Privacy Policy.
Tata McGraw-Hill is one of the many fine businesses ofThe McGraw-Hill Companies.


Aczel (SIE)Online Learning Center

Home > Chapter 15 > Multiple Choice Quiz