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A risk profile lists all possible monetary values and their corresponding probabilities.
Select one:
True
False

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Bayes' is useful in determining the value of perfect information (EVPI).

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True
False

Question 3

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Bayes' rule can be used for updating the probability of an uncertain outcome after observing the results of
a test or study.
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True
False

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For each possible decision and each possible outcome, the payoff table lists the monetary value earned
by an organization, where a positive value represents a profit and a negative value represents a loss.
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True
False

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If is the monetary value corresponding to outcome i and is its probability, then the expected

monetary value is defined as: EMV = .

Select one:
True
 False

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Prior probabilities are sometimes called likelihoods, the probabilities that are influenced by information
about the outcome of an earlier uncertainty.
Select one:
True
False

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Rational decision makers are never willing to violate the expected monetary value (EMV) maximization
criterion when large amounts of money are at stake.
Select one:
True
False

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The certainty equivalent is the certain dollar amount a risk-averse decision maker would accept in order
to avoid a gamble altogether.
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True
False

Question 9

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The expected monetary value (EMV) criterion is sometimes referred to as "playing the averages" and for
that reason should only be used for recurring decisions.
Select one:
True
False

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The expected value of perfect information (EVPI) is irrelevant concept since perfect information is almost
never available at any price.
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True
False

Question 11

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The expected value of perfect information (EVPI) is the difference between the EMV with perfect
information and the EMV with no additional information.
Select one:
True
False

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The expected value of perfect information (EVPI) is the most the decision maker would be willing to pay
for the sample information.
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True
False

Question 13
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The expected value of sample information (EVSI) is the difference between the EMV we can obtain with
sample information and the EMV we can obtain without information.
Select one:
True
False

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Tornado charts and spider charts can be used to determine which input variables have the most impact
on the expected value in a decision problem
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True
False

Question 15

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Question text

Utility function is a function that encodes a person's or company's feelings toward risk.
Select one:
True
False

Question 16

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A risk profile lists:

Select one:
a. all possible outcomes and their corresponding utility
b. all options and their possible outcomes
c. the nodes and branches for each possible outcome
d. None of these options
e. all possible monetary values and their corresponding probabilities

Question 17

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All problems related to decision making under uncertainty have three common elements:
Select one:
a. the set of decisions, the cost of each decision and the profit that can be made from each decision
 b. the set of possible outcomes, the set of decision variables and the constraints
c. the set of decisions, the set of possible outcomes, and a value model that prescribes results
d. None of these options
e. the mean, median, and mode

Question 18

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Expected monetary value (EMV) is:

Select one:
a. a decision criterion that places an equal amount on all states of nature
b. the weighted average of possible monetary values, weighted by their probabilities
c. the average or expected value of the information if it was completely accurate
d. the amount that you would lose by not picking the best alternative
e. the average or expected value of the decision if you knew what would happen ahead of time

Question 19

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If all monetary values in a decision problem are costs, then it is customary to list them as __________
values in a cost table.
Select one:
a. positive
 b. either positive or negative
c. All of these options
d. negative

Question 20

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If x is a monetary value (a payoff if positive, a cost if negative), U(x) the utility of this value, and R > 0 is

an adjustable parameter called the risk tolerance, then the function U(x) = 1 - is called
Select one:
a. exponential utility
b. Poisson utility
c. normal utility
d. binomial utility

Question 21

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In decision trees, probabilities are listed on probability branches. These probabilities may be events that
have already been observed.
Select one:
a. increased by
 b. conditional on
c. the same as
d. averaged with
e. marginal due to

Question 22

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In decision trees, time:

Select one:
a. proceeds from left to right
b. proceeds from top to bottom
c. proceeds from bottom to top
d. proceeds from right to left
e. is constant

Question 23

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In the nomenclature of Bayes' Rule, which of the following are probabilities that are conditioned on
information that is obtained?
Select one:
a. Posterior probabilities
 b. Prior probabilities
c. Subjective probabilities
d. Marginal probabilities
e. Objective probabilities

Question 24

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Mathematically, the utility function for risk adverse individuals is said to be _____________ and/or
_______________.
Select one:
a. increasing, linear
b. decreasing, linear
c. decreasing, convex
d. increasing, concave
e. increasing, decreasing

Question 25

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One class of "ready-made" utility functions is called exponential utility. Exponential utility has an
adjustable parameter called risk tolerance. The risk tolerance parameter measures:
Select one:
 a. the probability of an unfavorable outcome
b. how much risk there is in a given decision
c. None of these options
d. the decision maker's attitude toward risk
e. how much money the decision maker has to spend

Question 26

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The expected value of sample information (EVSI) is equal to:

Select one:
a. EMV with posterior information - EMV with prior information
b. EMV with free information - EMV without information
c. EMV with perfect information - EMV without information
d. EMV with free perfect information - EMV free information
e. None of these options

Question 27

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The solution procedure that was introduced in the book for decision trees is called the:
Select one:
 a. folding back on the tree
b. precision tree method
c. risk profile method
d. single-stage method
e. folding diagram

Question 28

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Which of the following is true with regard to a good decision?

Select one:
a. It accounts for unlucky outcomes
b. All of these options
c. It should be independent of the sequencing of uncertainties and decisions
d. It should incorporate all information about uncertainties and alternatives
e. It ensures that good outcomes will be obtained

Question 29

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Which of the following statements are true?

Select one:
 a. All of the above
b. Multistage decision problem is one where decisions and observations of uncertain outcomes
alternate.

c. None of the above

d. Sensitivity analysis is a process of seeing how optimal decision and EMV vary when one or more
inputs vary.
e. Contingency plan is a strategy in a multistage decision problem that specifies which decision to
make for each possible outcome.

Question 30

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Which of these sensitivity analysis charts is most useful in determining whether the optimal decision
changes over the range of the input variable?
Select one:
a. All of these options
b. Spider chart
c. Tornado chart
d. None of these options
e. Strategy region chart

Question 1

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One method of dealing with heteroscedasticity is to try a logarithmic transformation of the data.
Select one:
True
False

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Which of the following would be considered a definition of an outlier?

Select one:
a. All of these options
b. Values for individual explanatory variables that fall outside the general pattern of the other
observations
c. A value whose residual is abnormally large in magnitude
d. An extreme value for one or more variables

Question 3

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Question text

When you try to find the most appropriate input probability distribution in a simulation model,
you first have to choose the most appropriate family, and then you have to select the most
appropriate member of that family
Select one:
True
False

Question 4

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The assumptions of regression are: 1) there is a population regression line, 2) the dependent variable is
normally distributed, 3) the standard deviation of the response variable remains constant as the
explanatory variables increase, and 4) the errors are probabilistically independent.
Select one:
True
False

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One of the primary advantages of simulation models that they enable managers to answer
what-if questions about changes in systems without actually changing the systems themselves.
Select one:
True
 False

Question 6

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Which of the following @RISK functions can be used to find the probability of a particular value in an
output distribution?
Select one:
a. RISKMAX
b. RISKMIN
c. RISKTARGET
d. RISKPERCENTILE
e. None of these options

Question 7

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The "building blocks" of all spreadsheet simulation models are:

Select one:
a. probability distributions
b. deterministic inputs
c. random numbers between 0 and 1
d. decision variables
Question 8

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One important special use of bounded distributions is when the only possible values are:
Select one:
a. nonnegative.
b. uniformly distributed around the mean.
c. less than zero.
d. skewed to the right.

Question 9

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It is usually not too difficult to predict the shape of the output distribution from the shape(s) of
the input distribution(s).
Select one:
True
False

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Linear programming problems can always be formulated algebraically, but not always on spreadsheet.
Select one:
True
False

Question 11

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If Solver fails to find an optimal solution to an integer programming problem, we might be able to find a
near optimal solution by increasing the tolerance setting.
Select one:
True
False

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When there is a group of explanatory variables that are in some sense logically related, all of them must
be included in the regression equation.
Select one:
True
False

Question 13

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Suppose a liquor store sells beer for a net profit of $1 per unit and wine for a net profit of $2 per unit. Let x
equal the amount of beer sold and y equal the amount of wine sold. An algebraic formulation of the profit
function is:
Select one:

a.

b.

c.

d.

Question 14

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Which of the following functions is not an @RISK statistical function?

Select one:
 a. RISKMIN
b. None of these options
c. RISKPERCENTILE
d. RISKSIMTABLE
e. RISKMAX

Question 15

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Some important characteristics of probability distributions in general include the following

distinctions:
Select one:
a. Positive (or nonnegative) versus unrestricted
b. Discrete versus continuous
c. Bounded versus unbounded
d. All of these options
e. Symmetric versus skewed

Question 16

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Forward regression:
Select one:
 a. begins with all potential explanatory variables in the equation and deletes them one at a
time until further deletion would do more harm than good.
b. adds and deletes variables until an optimal equation is achieved.
c. begins with no explanatory variables in the equation and successively adds one at a time
until no remaining variables make a significant contribution.
d. randomly selects the optimal number of explanatory variables to be used

Question 17

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RISKSIMTABLE is a function in @Risk for running several simulations simultaneously, one for
each setting of an input or decision variable.
Select one:
True
False

Question 18

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Infeasibility refers to the situation in which there are no feasible solutions to the LP model
Select one:
True
False
Question 19

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When the error variance is nonconstant, it is common to see the variation increases as the
explanatory variable increases (you will see a "fan shape" in the scatterplot). There are two ways
you can deal with this phenomenon. These are:
Select one:
a. the weighted least squares and the partial F
b. the partial F and a logarithmic transformation
c. stepwise regression and the partial F
d. the weighted least squares and a logarithmic transformation

Question 20

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Transportation and transshipment problems are both considered special cases of a class of linear
programming problems called
Select one:
a. minimum cost network flow problems
b. supply locations network problems
c. demand locations network problems
d. minimum cost problems

Question 21
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In aggregate planning models, the number of workers available influences the possible production levels.
Select one:
True
False

Question 22

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In an optimized network flow model (MCNFM), all the available capacity will be used.
Select one:
True
False

Question 23

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Which of the following statements are false regarding the numbers generated by the RAND
function in Excel?
Select one:
a. The numbers are probabilistically independent

b. The numbers are probabilistically dependent

c. The numbers are random between 0 and 1
d. The numbers are uniformly distributed between 0 and 1

Question 24

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Which of the following statements are true?

Select one:
a. We say a distribution is skewed to the right (or positively skewed) if the "longer tail" is the
right tail.
b. We say a distribution is skewed to the left (or negatively skewed) if the "longer tail" is the
left tail.
c. A probability distribution is symmetric (around some point) if the distribution to the left of
the point is a mirror image of the distribution to the right of the point.
d. All of the above

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In a transportation problem, if it costs $4 per item to ship up to 200 items between cities, and $2 per item
for each additional item, the proportionality assumption of LP is satisfied.
Select one:
True
False

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Which of the following statements is true regarding the Normal distribution?

Select one:
a. There is a 95% chance that values will be within ± 2 standard deviations of the mean
b. All of these options
c. It is always the appropriate distribution in simulation modeling
d. It does not permit negative values

Question 27

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The "random" numbers generated by the RAND function (or by any other package's random
number generator) are not really random.
Select one:
True
False
Question 28

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The flow balance constraint for each transshipment node, in a minimum cost network flow model, takes
the form
Select one:

a. Flow in Flow out + Net demand

b. Flow in Flow out + Net supply

c. Flow out Flow in + Net supply

d. Flow out Flow in + Net supply

e. Flow in = Flow out

Question 29

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A researcher can check whether the errors are normally distributed by using:
Select one:
a. a t-test or an F-test
b. the Durbin-Watson statistic
c. a histogram or a Q-Q plot
d. a frequency distribution or the value of the regression coefficient
Question 30

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The Durbin-Watson statistic can be used to measure of autocorrelation.

Select one:
True
False

Question 31

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In transportation problems, shipping costs are often nonlinear due to quantity discounts.
Select one:
True
False

Question 32

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Question text

Which of the following statements is correct regarding the graph of a discrete probability
distribution?
Select one:
a. All of these options
b. It is a series of spikes.
c. There is an empty space between adjacent spikes.
d. The height of each spike is the probability of the corresponding value.

Question 33

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We sometimes use discrete distributions in place of continuous distributions:

Select one:
a. when we need to generate a histogram
b. because they are more accurate.
c. because they are more simple.
d. when we don't know the mean and variance of the distribution.

Question 34

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The value at risk (VAR) is typically defined as the:

Select one:
a. 95th percentile of NPV distribution
b. 50th percentile of NPV distribution
c. 10th percentile of NPV distribution
d. 5th percentile of NPV distribution
e. 90th percentile of NPV distribution

Question 35

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In transportation problems, shipments between supply points or between demand points are possible.
Select one:
True
False

Question 36

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Which of the following is true regarding multiple optimal solutions?

Select one:
a. All solutions have the same shadow prices
b. All solutions have the same value for the objective function
c. All of these options
 d. All solutions have the same values for the decision variables

Question 37

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The binomial distribution is a discrete distribution that is applied to situations where n

independent and identical "trials" occur, with each trial resulting in a "success" or "failure," and
we want to generate the random number of successes in the n trials.
Select one:
True
False

Question 38

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Which of the following does not represent a broad class of applications of linear programming models?
Select one:
a. Forecasting models
b. Set covering models
c. Logistics models
d. Blending models
e. Financial portfolio models

Question 39
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The equation of the line representing the constraint is:

Select one:

a.

b.

c.

d.

Question 40

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Suppose that one equation has 3 explanatory variables and an F-ratio of 49. Another equation has 5
explanatory variables and an F-ratio of 38. The first equation will always be considered a better model.
Select one:
True
False

Question 41

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The Excel RAND() function generates random numbers from a Normal(0,1) distribution.
Select one:
True
False

Question 42

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Which of the following are not among the marketing applications of simulation?
Select one:
a. Customer preferences for different attributes of products
b. The effect of advertising on sales
c. None of these options
d. The entry of new brands into the market
e. Brand-switching behavior of customers

Question 43

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Question text

When we solve a linear programming problem with Solver, we cannot guarantee that the solution
obtained is an optimal solution.
Select one:
True
False

Question 44

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The RAND() function in excel models which of the following probability distributions:
Select one:
a. Normal(0,1)
b. Uniform(-1,1).
c. Uniform(0,1)
d. Normal(-1,1)

Question 45

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Any integer programming problem involving 0-1 variables with only one constraint is called a knapsack
problem.
Select one:
True
 False

Question 46

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Which of the following is not one of the assumptions of regression?

Select one:
a. The errors are probabilistically independent
b. The response variable is normally distributed
c. There is a population regression line
d. The standard deviation of the response variable increases as the explanatory variables increase

Question 47

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Which of the following definitions best describes parsimony?

Select one:
a. Being able to explain all of the change in the response variable
b. Explaining the most with the least
c. Being able to predict the value of the response variable far into the future
d. Explaining the least with the most

Question 48
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Uncertain timing and the events that follow in process modeling can be modeled using IF statements.
Select one:
True
False

Question 49

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In a network representation of a transportation problem, the arcs generally represent:

Select one:
a. capacities
b. geographic locations
c. warehouses
d. flows

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The problem which deals with the direct distribution of products from supply locations to demand
locations is called a(n)
Select one:
a. transshipment problem
b. assignment problem
c. network problem
d. transportation problem