1. Network representations can be used for the 9.

The figure below shows the nodes (A–I) and

following problems: capacities (labelled on arcs in packages/day) of a
All of these shipping network. The firm would like to know
how many packages per day can flow from node
2. Which of the following is an example of a
A to node I. How many transshipment nodes
transshipment node?
are present in this problem? 7
All of these
10. Which of the following could be the subject
3. Which of the following is an application of a of a maximum flow problem? All of the choices
shortest path problem? are correct.

I, III and IV 11. The figure below shows the possible routes
from city A to city M as well as the cost (in
4. The figure below shows the nodes (A–I) and dollars) of a trip between each pair of cities
capacities (labelled on arcs in TB/s) of a (note that if no arc joins two cities it is not
computer network. The firm would like to know possible to travel non-stop between those two
how much information can flow from node A to cities). A traveler wishes to find the lowest cost
node I. Which type of network optimization option to travel from city A to city M. Which
problem is used to solve this problem? type of network optimization problem is used to
Minimum Flow Problem solve this problem? Shortest Path Problem
5. In a shortest path problem, when "real travel" 12. Which of the following techniques or tools
through a network can end at more than one can be used to perform sensitivity analysis for an
node: integer programming problem? II only
A and C only 13. Binary integer programming can be used
6. For a minimum cost flow problem to have a for:
feasible solution, which of the following must be All of these.
true?
14. A firm has prepared the following binary
There is an equal amount of supply and demand. integer program to evaluate a number of
7. A manufacturing firm has three plants and potential locations for new warehouses. The
wants to find the most efficient means of firm’s goal is to maximize the net present value
meeting the requirements of its four customers. of their decision while not spending more than
The relevant information for the plants and their currently available capital.
customers, along with shipping costs in dollars Max 20x1 + 30x2 + 10x3 + 15x4
per unit, are shown in the table below: How
many supply nodes are present in this problem? s.t. 5x1 + 7x2 + 12x3 + 11x4 ≤ 21 {Constraint
4/3 1}

8. A manufacturing firm has three plants and x1 + x2 + x3 + x4 ≥ 2 {Constraint 2}

wants to find the most efficient means of
x1 + x2 ≤ 1 {Constraint 3}
meeting the requirements of its four customers.
The relevant information for the plants and x1 + x3 ≥ 1 {Constraint 4}
customers, along with shipping costs in dollars
per unit, are shown in the table below: x2 = x4 {Constraint 5}
How many arcs will the network have? 12 xj={1, if location j is selected 0, otherwise
xj=1, if location j is selected 0, otherwise
 xj={1, if location j is selected0, otherwise
xj=1, if location j is selected 0, otherwise

Which constraint ensures that the firm will not Which of the constraints enforces a mutually
spend more capital than it has available (assume exclusive relationship? Constraint 2
that each potential location has a different cost)?
17. The university is scheduling cleaning crews
Constraint 1
for its ten buildings. Each crew has a different
15. A firm has prepared the following binary cost and is qualified to clean only certain
integer program to evaluate a number of buildings. There are eight possible crews to
potential new capital projects. The firm's goal is choose from in this case. The goal is to
to maximize the net present value of their minimize costs while making sure that each
decision while not spending more than their building is cleaned. The management science
currently available capital. department formulated the following linear
programming model to help with the selection
Max 100x1 + 120x2 + 90x3 + 135x4 process.
s.t. 150x1 + 200x2 + 225x3 + 175x4 ≤ 500 Min 200x1 + 250x2 + 225x3 + 190x4 +215x5 +
{Constraint 1} 245x6 + 235x7 + 220x8
x1 + x2 + x3 + x4 ≥ 2 {Constraint 2} s.t. x1 + x2 + x5 + x7 ≥ 1 {Building A
x2 + x4 ≤ 1 {Constraint 3} constraint}

x2 + x3 ≥ 1 {Constraint 4} x1 + x2 + x3 ≥ 1 {Building B constraint}

x1 = x4 {Constraint 5} x6 + x8 ≥ 1 {Building C constraint}

xj={1, if project j is selected0, otherwise x1 + x4 + x7 ≥ 1 {Building D constraint}

xj=1, if project j is selected 0, otherwise x2 + x7 ≥ 1 {Building E constraint}

Which of the constraints enforces a mutually x3 + x8 ≥ 1 {Building F constraint}

exclusive relationship? Constraint 2 x2 + x5 + x7 ≥ 1 {Building G constraint}
16. A firm has prepared the following binary x1 + x4 + x6 ≥ 1 {Building H constraint}
integer program to evaluate a number of
potential locations for new warehouses. The x1 + x6 + x8 ≥ 1 {Building I constraint}
firm’s goal is to maximize the net present value
x1 + x2 + x7 ≥ 1 {Building J constraint}
of their decision while not spending more than
their currently available capital. xj={1, if crew j is selected 0, otherwise
Max 20x1 + 30x2 + 10x3 + 15x4 xj=1, if crew j is selected 0, otherwise
s.t. 5x1 + 7x2 + 12x3 + 11x4 ≤ 21 {Constraint Which of the crews is the least expensive? Crew
1} 4
x1 + x2 + x3 + x4 ≥ 2 {Constraint 2} 18. In a BIP problem with 2 mutually exclusive
alternatives, x1 and x2, the following constraint
x1 + x2 ≤ 1 {Constraint 3}
needs to be added to the formulation: x1 + x2 ≤
x1 + x3 ≥ 1 {Constraint 4} 1

x2 = x4 {Constraint 5}
19. The university is scheduling cleaning crews Max 20x1 + 65x2 – 100y1 – 200y2
for its ten buildings. Each crew has a different
s.t. 5x1 + 10x2 ≤ 100 {Constraint 1}
cost and is qualified to clean only certain
buildings. There are eight possible crews to 20x1 + 50x2 ≤ 250 {Constraint 2}
choose from in this case. The goal is to
minimize costs while making sure that each 1x1 + 1.5x2 ≤ 10 {Constraint 3}
building is cleaned. The management science My1 ≥ x1 {Constraint 4}
department formulated the following linear
programming model to help with the selection My2 ≥ x2 {Constraint 5}
process.
yi={1, if product j is produced0, otherwise
Min 200x1 + 250x2 + 225x3 + 190x4 +215x5 +
yi=1, if product j is produced 0, otherwise
245x6 + 235x7 + 220x8
Which of the constraints limit the amount of
s.t. x1 + x2 + x5 + x7 ≥ 1 {Building A
raw materials that can be consumed? Constraint
constraint}
1
x1 + x2 + x3 ≥ 1 {Building B constraint}
21. In a BIP problem with 2 mutually exclusive
x6 + x8 ≥ 1 {Building C constraint} alternatives, x1 and x2, the following constraint
needs to be added to the formulation if one
x1 + x4 + x7 ≥ 1 {Building D constraint} alternative must be chosen: x1 + x2 = 1
x2 + x7 ≥ 1 {Building E constraint} 22. A new pizza restaurant is moving into town.
x3 + x8 ≥ 1 {Building F constraint} The owner is considering a number of potential
sites and would like to minimize the initial
x2 + x5 + x7 ≥ 1 {Building G constraint} investment involved with purchasing locations.
However, the owner is very concerned about
x1 + x4 + x6 ≥ 1 {Building H constraint}
delivery time and wants to make sure that every
x1 + x6 + x8 ≥ 1 {Building I constraint} neighborhood in the city can have a pizza
delivered in 15 minutes or less. The owner has
x1 + x2 + x7 ≥ 1 {Building J constraint}
divided the city into 10 neighborhoods (A–J)
xj={1, if crew j is selected 0, otherwise and is currently considering a total of 8 different
locations. To help with the decision, the owner
xj=1, if crew j is selected 0, otherwise formulated the following linear programming
Which of the constraints is a set covering model: Min 100x1 + 120x2 + 90x3 + 135x4
constraint? Building A constraint +75x5 + 85x6 + 110x7 + 135x8

20. A manufacturer has the capability to produce s.t. x1 + x2 + x5 + x7 ≥ 1 {Neighborhood A

both chairs and tables. Both products use the constraint}
same materials (wood, nails and paint) and both x1 + x2 + x3 ≥ 1 {Neighborhood B constraint}
have a setup cost ($100 for chairs, $200 for
tables). The firm earns a profit of $20 per chair x5 + x6 + x8 ≥ 1 {Neighborhood C constraint}
and $65 per table and can sell as many of each
x1 + x4 + x7 ≥ 1 {Neighborhood D constraint}
as it can produce. The daily supply of wood,
nails and paint is limited. To manage the x2 + x3 + x7 ≥ 1 {Neighborhood E constraint}
decision-making process, an analyst has
x3 + x4 + x8 ≥ 1 {Neighborhood F constraint}
formulated the following linear programming
model: x2 + x5 + x7 ≥ 1 {Neighborhood G constraint}
x1 + x4 + x6 ≥ 1 {Neighborhood H constraint} 25. A nonlinear function may contain which of
the following?
x1 + x6 + x8 ≥ 1 {Neighborhood I constraint}
Multiple Choice
x1 + x2 + x7 ≥ 1 {Neighborhood J constraint}
A term that contains a single variable with an
xj={1, if location j is selected 0, otherwise
exponent of 1.
xj=1, if location j is selected 0, otherwise
A term that contains a single variable with an
exponent of 2.

Which of the locations is the most expensive? A term that is a constant times the product of
Location 4 two variables.

23. A manufacturer has the capability to produce All of these.

both chairs and tables. Both products use the 26. The following chart shows the relationship
same materials (wood, nails and paint) and both between marketing and sales.
have a setup cost ($100 for chairs, $200 for
tables). The firm earns a profit of $20 per chair
and $65 per table and can sell as many of each
as it can produce. The daily supply of wood,
nails and paint is limited. To manage the
decision-making process, an analyst has
formulated the following linear programming
model: Max 20x1 + 65x2 – 100y1 – 200y2
s.t. 5x1 + 10x2 ≤ 100 {Constraint 1}
20x1 + 50x2 ≤ 250 {Constraint 2}
1x1 + 1.5x2 ≤ 10 {Constraint 3}
Which of the following statements is TRUE?
My1 ≥ x1 {Constraint 4}
There is a local maximum when marketing
My2 ≥ x2 {Constraint 5} expenditure equals $120.
yi={1, if product j is produced0, otherwise There is a local minimum when marketing
expenditure equals $140.
yi=1, if product j is produced 0, otherwise
There is a local maximum when marketing
Which of the following would be a reasonable
expenditure equals $160.
value for the variable "M"? 100
I, II, III
24. Which of the following is an example of a
nonlinear function? 27. A linear function may contain which of the
following?
Multiple Choice
A term that contains a single variable with an
Profit = 5x1 + 7x2 − 2x22
exponent of 1.
Profit = 8x1x2 − x12 − 4x22
A term that contains a single variable with an
Profit = x1 + 6x2 + 3x1x2 exponent of 2.
All of the choices are correct.
A term that is a constant times the product of
two variables.
I only.
28. The measure of risk in a portfolio selection
problem is called:
Multiple Choice
the covariance of the return.
the variance of the return.
Which of the following statements is TRUE?

the expected return. There is a local minimum when marketing

expenditure equals $120.
decreasing marginal return.
There is a local maximum when marketing
None of the choices is correct. expenditure equals $120.
the variance of the return. There is a global maximum when marketing
29. Which of the following are advantages of the expenditure equals $160.
Evolutionary Solver? II and III only
Multiple Choice
The complexity of the objective function does 31. If the data cells are in column D and the
not matter. changing cells are in column C, which of the
It will always find the optimal solution. following are linear formulas in a spreadsheet?

It is faster than the standard Solver. a. SUMPRODUCT(D1:D6, C1:C6)

It always finds the same solution. b. SUMPRODUCT(C1:C3, C4:C6)

None of the choices is correct. c. SUM(C1:C6)

It will always find the optimal solution. d. all of these

30. The following chart shows the relationship e. a and c only

between marketing and sales. A and C only

32. The measure of risk for pairs of stocks in a

portfolio selection problem is called:
Covariance of return
33. Which of the following statements about
Solver’s Multistart option are TRUE?
Multiple Choice
Multistart always uses 100 random starting
points.
Multistart may not find the optimal solution. Set up the problem in Excel and find the optimal
solution. What is the maximum profit possible?
Multistart works well with functions such as
"IF" and "ROUND". Multiple Choice
Using Multistart guarantees that Solver will find $3,500
the optimal solution.
$4,500
A nonlinear problem will always have the
$6,500
solution for any starting point.
$7,500
34. The following chart shows a relationship
between advertising expenditures and sales. $5,500
$4,500
36. A manufacturer of two products (Widgets
and Gadgets) makes a profit of $110 for each
widget sold and $120 for each gadget sold.
However, production of these products generates
hazardous waste charges at the rate of 3W2
(where W is the number of Widgets produced)
and 2G3 (where G is the number of Gadgets
produced). The manufacturer has ample supplies
of all raw materials and can sell all the Widgets
Which of the following describes the chart in and Gadgets it produces. The firm has sufficient
terms of a linear relationship? capacity to produce any realistic quantity of both
The chart shows discontinuities. products.

The chart shows a proportional relationship. What is the optimal quantity of each product to
produce? (Round your answers to 1 decimal
The chart shows increasing marginal returns. place.) 18.333 – W , 4.472 - G
The chart shows a linear relationship. What is the maximum profit the manufacturer
can earn? (Round your answer to 2 decimal
The chart is piecewise linear.
places.) 1366.10
The chart is piecewise linear.
37. The relationship between marketing
35. A manufacturer produces both widgets and expenditures (x) and sales (y) is given by the
gadgets. Widgets generate a profit of $50 each following formula, y = 8x − 0.20x2 + 6. (Hint:
and gadgets have a profit margin of $35 each. To Use the Nonlinear Solver tool).
produce each item, a setup cost is incurred. This
setup cost of $500 for widgets and $400 for What level of marketing expenditure will
gadgets. Widgets consume 4 units of raw maximize sales? (Round your answer to 2
material A and 5 units of raw material B. decimal places.) 20
Gadgets consume 6 units of raw material A and What is the maximum sales value? (Round
2 units of raw material B. Each day, the your answer to 2 decimal places.) 86
manufacturer has 500 units of each raw material
available. 38. Refer to the following payoff table:
There is an option of paying $100 to have predict S1 60% of the time. When the true
research done to better predict which state of state of nature is S2, the research will
nature will occur. When the true state of accurately predict S2 80% of the time.
nature is S1, the research will accurately
predict S1 60% of the time. When the true What is the posterior probability of S2 given
state of nature is S2, the research will that the research predicts S2? 0.57
accurately predict S2 80% of the time.
42. Refer to the following payoff table:
Given that the research is not done, what is the
expected payoff using Bayes’ decision rule? There is an option of paying $100 to have
40 research done to better predict which state of
nature will occur. When the true state of
39. Refer to the following payoff table: nature is S1, the research will accurately
There is an option of paying $100 to have predict S1 60% of the time. When the true
research done to better predict which state of state of nature is S2, the research will
nature will occur. When the true state of accurately predict S2 80% of the time.
nature is S1, the research will accurately
predict S1 60% of the time. When the true Given that the research is done, what is the
state of nature is S2, the research will expected payoff using Bayes’ decision rule?
accurately predict S2 80% of the time. -44

What is the expected value of perfect 43. The construction manager for ABC
information? 85 Construction must decide whether to build
single family homes, apartments, or
condominiums. He estimates annual profits
(in $000) will vary with the population trend
as follows:

If he uses Bayes’ decision rule, which kind of

40. Refer to the following payoff table: dwellings will he decide to build? Apartment

There is an option of paying $100 to have 44. Based on the following payoff table, answer
research done to better predict which state of the following:
nature will occur. When the true state of Alternative Yes No
nature is S1, the research will accurately
predict S1 60% of the time. When the true Small 10 30
state of nature is S2, the research will
accurately predict S2 80% of the time. Medium 20 40
Medium Large 30 45
What is the posterior probability of S1 given
that the research predicts S1? 0.82 Large 40 35
Extra Large 60 20
41. Refer to the following payoff table:
Prior Probability 0.3 0.7
There is an option of paying $100 to have
research done to better predict which state of The maximax strategy is:
nature will occur. When the true state of Extra large
nature is S1, the research will accurately
45. The maximin criterion refers to: source for this problem? Node A is the source,
Node I is the sink.
Multiple Choice
6. A firm has prepared the following binary
minimizing the maximum return.
integer program to evaluate a number of
maximizing the minimum return. potential locations for new warehouses. The
firm’s goal is to maximize the net present
choosing the alternative with the highest payoff.
value of their decision while not spending
choosing the alternative with the minimum more than their currently available capital.
payoff.
Max 20x1 + 30x2 + 10x3 + 15x4
None of the answer choices is correct.
s.t. 5x1 + 7x2 + 12x3 + 11x4 ≤ 21 {Constraint
46. The construction manager for ABC 1}
Construction must decide whether to build
single family homes, apartments, or x1 + x2 + x3 + x4 ≥ 2 {Constraint 2}
condominiums. He estimates annual profits (in
x1 + x2 ≤ 1 {Constraint 3}
$000) will vary with the population trend as
follows: x1 + x3 ≥ 1 {Constraint 4}
What is the expected annual profit for the x2 = x4 {Constraint 5}
dwellings that he will decide to build using
Bayes’ decision rule? $132,000 xj={1, if location j is selected0, otherwise
xj=1, if location j is selected 0, otherwise
7. Which of the constraints ensures that at
least two of the potential sites will be
selected? Constraint 2
8. In a BIP problem, 1 corresponds to a yes
decision and 0 to a no decision. If project A
can be undertaken only if project B is also
1. Which of the following will have negative net undertaken then the following constraint needs
flow in a minimum cost flow problem? Demand
to be added to the formulation: A ≤ B
nodes
9. Binary integer programming problems can
2. Which of the following is not an assumption
answer which types of questions? All of these.
of a minimum cost flow problem? There is an
equal number of supply and demand nodes. 10. A new pizza restaurant is moving into
3. What is the objective of a maximum flow town. The owner is considering a number of
problem? Maximize the amount flowing through potential sites and would like to minimize the
a network. initial investment involved with purchasing
locations. However, the owner is very
5. The figure below shows the nodes (A–I) and concerned about delivery time and wants to
capacities (labelled on arcs in packages/day) of a make sure that every neighborhood in the city
shipping network. The firm would like to know can have a pizza delivered in 15 minutes or
how many packages per day can flow from node less. The owner has divided the city into 10
A to node I. Which nodes are the sink and neighborhoods (A–J) and is currently
considering a total of 8 different locations. To
help with the decision, the owner formulated s.t. x1 + x2 + x5 + x7 ≥ 1 {Building A
the following linear programming model: constraint}
Min 100x1 + 120x2 + 90x3 + 135x4 +75x5 + x1 + x2 + x3 ≥ 1 {Building B constraint}
85x6 + 110x7 + 135x8
x6 + x8 ≥ 1 {Building C constraint}
s.t.x1 + x2 + x5 + x7 ≥ 1 {Neighborhood A
x1 + x4 + x7 ≥ 1 {Building D constraint}
constraint}
x2 + x7 ≥ 1 {Building E constraint}
x1 + x2 + x3 ≥ 1 {Neighborhood B constraint}
x3 + x8 ≥ 1 {Building F constraint}
x5 + x6 + x8 ≥ 1 {Neighborhood C constraint}
x2 + x5 + x7 ≥ 1 {Building G constraint}
x1 + x4 + x7 ≥ 1 {Neighborhood D
constraint} x1 + x4 + x6 ≥ 1 {Building H constraint}
x2 + x3 + x7 ≥ 1 {Neighborhood E constraint} x1 + x6 + x8 ≥ 1 {Building I constraint}
x3 + x4 + x8 ≥ 1 {Neighborhood F constraint} x1 + x2 + x7 ≥ 1 {Building J constraint}
x2 + x5 + x7 ≥ 1 {Neighborhood G xj={1, if crew j is selected 0, otherwise
constraint}
xj=1, if crew j is selected 0, otherwise
x1 + x4 + x6 ≥ 1 {Neighborhood H
constraint} Which of the crews is the least expensive?
Crew 4
x1 + x6 + x8 ≥ 1 {Neighborhood I constraint}
x1 + x2 + x7 ≥ 1 {Neighborhood J constraint}
xj={1, if location j is selected 0, otherwise
xj=1, if location j is selected 0, otherwise
Which of the constraints is a set covering
constraint? All of the choices. 12. A firm has prepared the following binary
integer program to evaluate a number of
11. The university is scheduling cleaning potential new capital projects. The firm's goal
crews for its ten buildings. Each crew has a is to maximize the net present value of their
different cost and is qualified to clean only decision while not spending more than their
certain buildings. There are eight possible currently available capital.
crews to choose from in this case. The goal is
to minimize costs while making sure that each Max 100x1 + 120x2 + 90x3 + 135x4
building is cleaned. The management science s.t. 150x1 + 200x2 + 225x3 + 175x4 ≤ 500
department formulated the following linear {Constraint 1}
programming model to help with the selection
process. x1 + x2 + x3 + x4 ≥ 2 {Constraint 2}

Min 200x1 + 250x2 + 225x3 + 190x4 +215x5 x2 + x4 ≤ 1 {Constraint 3}

+ 245x6 + 235x7 + 220x8 x2 + x3 ≥ 1 {Constraint 4}
x1 = x4 {Constraint 5}
xj={1, if project j is selected0,otherwise s.t. 150x1 + 200x2 + 225x3 + 175x4 ≤ 500
{Constraint 1}
xj=1, if project j is selected 0,otherwise
x1 + x2 + x3 + x4 ≥ 2 {Constraint 2}
Which of the constraints ensures that at least
two of the potential projects will be selected? x2 + x4 ≤ 1 {Constraint 3}
Constraint 2
x2 + x3 ≥ 1 {Constraint 4}
13. A bakery produces both pies and cakes.
x1 = x4 {Constraint 5}
Both products use the same materials (flour,
sugar and eggs) and both have a setup cost xj={1, if project j is selected0, otherwise
($100 for cakes, $200 for pies). The baker
earns a profit of $10 per cake and $12 per pie xj=1, if project j is selected 0, otherwise
and can sell as many of each as it can produce. Which of the constraints enforces a
The daily supply of flour, sugar and eggs is contingent relationship? Constraint 5
limited. To manage the decision-making
process, an analyst has formulated the 15. A firm has prepared the following binary
following linear programming model (assume integer program to evaluate a number of
that it is possible to produce fractional pies potential new capital projects. The firm's goal
and cakes for this example): is to maximize the net present value of their
decision while not spending more than their
Max 10x1 + 12x2 – 100y1 – 200y2 currently available capital.
s.t. 5x1 + 10x2 ≤ 1000 {Constraint 1} Max 100x1 + 120x2 + 90x3 + 135x4
2x1 + 5x2 ≤ 2500 {Constraint 2} s.t. 150x1 + 200x2 + 225x3 + 175x4 ≤ 500
2x1 + 1x2 ≤ 300 {Constraint 3} {Constraint 1}

My1 ≥ x1 {Constraint 4} x1 + x2 + x3 + x4 ≥ 2 {Constraint 2}

My2 ≥ x2 {Constraint 5} x2 + x4 ≤ 1 {Constraint 3}

yi={1, if product j is produced0, otherwise x2 + x3 ≥ 1 {Constraint 4}

yi=1, if product j is produced 0, otherwise x1 = x4 {Constraint 5}

Which of the constraints limit the amount of xj={1, if project j is selected0,otherwise

raw materials that can be consumed? xj=1, if project j is selected 0,otherwise
Constraint 3
Which constraint ensures that the firm will not
14. The firm has prepared the following binary spend more capital than it has available
integer program to evaluate a number of (assume that each potential project has a
potential new capital projects. The firm's goal different cost)? Constraint 1
is to maximize the net present value of their
decision while not spending more than their 16. If the data cells are in column D and the
currently available capital. changing cells are in column C, which of the
following are not linear formulas in a
Max 100x1 + 120x2 + 90x3 + 135x4 spreadsheet?
I. IF(D1 >= 6, C1, C2)
II. ROUND(C3) Solving feature will typically say the model is
of what type? NSP
III. ABS(C3)
21. When there are decreasing marginal
II and III only.
returns:
17. Which of the following can be part of a
Multiple Choice
nonlinear profit graph?
the slope of the graph never increases but
I. Decreasing marginal returns.
sometimes decreases.
II. Increasing marginal returns.
separable programming should not be used.
III. Discontinuities.
the graph always consists of a series of line
All of these. segments.

18. Evolutionary Solver is based on which of the graph always consists of a smooth curve.
the following concepts?
the slope of the graph never decreases but
I. Genetics. sometimes increases.

II. Evolution. the slope of the graph never increases but

sometimes decreases
III. Survival of the Fittest.
22. Based on the following payoff table,
I, II, III only. answer the following:
19. Separable programming will always find Alternative High Low
the optimal solution when the following is
true: Buy 90 −10

Multiple Choice Rent 70 40

The profit or cost graph is piecewise linear. Lease 60 55

There are decreasing marginal returns. Prior Probability 0.4 0.6

The profit or cost graph is piecewise linear The maximax strategy is:
and there are decreasing marginal returns must
Multiple Choice
both be true.
Lease.
Separable programming only finds an
approximate solution. Low.
None of the choices is correct. Rent.
The profit or cost graph is piecewise linear High.
and there are decreasing marginal returns must
Buy.
both be true.
Buy.
20. If a model uses IF or ROUND functions
that incorporate the changing cells, then 23. Based on the following payoff table,
running the RSPE Analyze Model without answer the following:
Alternative Yes No D 10 12 12
Small 10 30 E 50 40 −28
Medium 20 40 Prior Probability 0.3 0.2 0.5
Medium Large 30 45 The expected value of perfect information is:
Large 40 35 Multiple Choice
Extra Large 60 20 10.5.
Prior Probability 0.3 0.7 23.
The expected value of perfect information is: 0.
Multiple Choice −28.
40.5. 26. Based on the following payoff table,
answer the following:
60.
Alternative High Medium Low
9.
A 20 20 5
49.5.
B 25 30 11
4.5.
C 30 12 13
9
D 10 12 12
24. Based on the following payoff table,
answer the following: E 50 40 −28
Alternative High Low Prior Probability 0.3 0.2 0.5
Buy 90 −10 The expected value of perfect information is:
10.5
Rent 70 40
27. Which one of the following statements is
Lease 60 55
not correct when making decisions? All
Prior Probability 0.4 0.6 probabilities are assumed to be equal.

The Bayes’ decision rule strategy is: 28. The construction manager for ABC
Construction must decide whether to build
Lease. single family homes, apartments, or
25. Based on the following payoff table, condominiums. He estimates annual profits
answer the following: (in $000) will vary with the population trend
as follows:
Alternative High Medium Low
Population Trend
A 20 20 5
Type Declining Stable Growing
B 25 30 11
Single Family 200 90 70
C 30 12 13
Apartments 70 170 90 C 30 12 13
Condos−20 100 220 D 10 12 12
Prior Probability 0.4 0.5 0.1 E 50 40 −28
If he uses the maximum likelihood criterion, Prior Probability 0.3 0.2 0.5
which kind of dwellings will he decide to
The maximum likelihood strategy is:
build? Apartment
Multiple Choice
27. The construction manager for ABC
Construction must decide whether to build E.
single family homes, apartments, or
condominiums. He estimates annual profits C.
(in $000) will vary with the population trend D.
as follows:
B.
Population Trend
A.
Type Declining Stable Growing
C
Single Family 200 90 70
29. Based on the following payoff table,
Apartments 70 170 90 answer the following:
Condos−20 100 220 Alternative High Medium Low
Prior Probability 0.4 0.5 0.1 A 20 20 5
What is his expected value of perfect B 25 30 11
information?
C 30 12 13
Multiple Choice
D 10 12 12
$132,000
E 50 40 −28
$123,000
Prior Probability 0.3 0.2 0.5
$187,000
The Bayes’ decision rule strategy is:
$55,000
B
$65,000
$55,000
28. Based on the following payoff table,
answer the following:
Alternative High Medium Low
A 20 20 5
B 25 30 11