Decision Theory– Static

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Question 1

Free

True/False

Decision trees, with their predetermined analysis of a situation, are really not useful in making health care decisions since every person is unique.

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True

False

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Question 2

Free

True/False

Bounded rationality refers to the limits imposed on decision making because of costs, human abilities, time, technology, and/or availability of information.

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False

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Question 3

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True/False

The expected monetary value approach is most appropriate when the decision maker is risk neutral.

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True

False

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Question 4

Free

True/False

The expected value of perfect information is inversely related to losses predicted.

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False

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Question 5

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True/False

Expected monetary value gives the long-run average payoff if a large number of identical decisions could be made.

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Question 6

True/False

Among decision environments, risk implies that certain parameters have probabilistic outcomes.

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True

False

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Question 7

True/False

Among decision environments, uncertainty implies that states of nature have wide-ranging probabilities associated with them.

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True

False

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Question 8

True/False

In decision theory, states of nature refer to possible future conditions.

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True

False

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Question 9

True/False

The maximin approach involves choosing the alternative with the highest payoff.

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True

False

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Question 10

True/False

The maximin approach involves choosing the alternative that has the "best worst" payoff.

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True

False

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Question 11

True/False

The Laplace criterion treats states of nature as being equally likely.

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True

False

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Question 12

True/False

The maximax approach is a pessimistic strategy.

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True

False

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Question 13

True/False

A weakness of the maximin approach is that it loses some information.

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True

False

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Question 14

Multiple Choice

In a decision-making setting, if the manager has to contend with limits on the amount of information he or she can consider, this can lead to a poor decision due to __________ .

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bounded rationality

suboptimization

risk aversion

misspecification

complexification

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Question 15

Multiple Choice

Departmentalizing decisions increases the risk of __________ leading to a poor decision.

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bounded rationality

suboptimization

risk aversion

misspecification

complexification

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Question 16

Multiple Choice

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with issues, it raises the possibility that poor decisions will result due to .

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risk aversion;suboptimization

economies of scale; risk aversion

span of control;suboptimization

span of control; risk aversion

economies of scale; limited span of control

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Question 17

Multiple Choice

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. What is the expected value of perfect information?

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$5,000

$4,000

$3,000

$2,000

$1,000

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Question 18

Multiple Choice

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. The decision maker has discovered a firm that will, for a fee of $1,000, make her position-risk free. How much better off will her firm be if she takes this firm up on its offer?

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$5,000

$4,000

$3,000

$2,000

$1,000

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Question 19

Multiple Choice

Option A has an expected value of $2,000, a minimum payoff of -$4,000, and a maximum payoff of $18,000. Option B has an expected value of $2,200, a minimum payoff of -$1,000, and a maximum payoff of $6,000. Option C has an expected value of $1,900, a minimum payoff of $100, and a maximum payoff of $2,000. In this situation, a risk-averse decision maker would pay for his risk aversion, and a risk-seeking decision maker would pay for his risk seeking.

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$200; $300

$1,100; $5,000

$300; $200

$2,100; $16,000

$400; $200

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Question 20

Multiple Choice

The term "suboptimization" is best described as the:

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result of individual departments making the best decisions for their own areas but hurting other areas.

limitations on decision making caused by costs and time.

result of failure to adhere to the steps in the decision process.

result of ignoring symptoms of the problem.

optimization on a micro level that extends to the macro level.

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Decision Theory– Static

Decision trees, with their predetermined analysis of a situation, are really not useful in making health care decisions since every person is unique.

Bounded rationality refers to the limits imposed on decision making because of costs, human abilities, time, technology, and/or availability of information.

The expected monetary value approach is most appropriate when the decision maker is risk neutral.

The expected value of perfect information is inversely related to losses predicted.

Expected monetary value gives the long-run average payoff if a large number of identical decisions could be made.

Among decision environments, risk implies that certain parameters have probabilistic outcomes.

Among decision environments, uncertainty implies that states of nature have wide-ranging probabilities associated with them.

In decision theory, states of nature refer to possible future conditions.

The maximin approach involves choosing the alternative with the highest payoff.

The maximin approach involves choosing the alternative that has the "best worst" payoff.

The Laplace criterion treats states of nature as being equally likely.

The maximax approach is a pessimistic strategy.

A weakness of the maximin approach is that it loses some information.

In a decision-making setting, if the manager has to contend with limits on the amount of information he or she can consider, this can lead to a poor decision due to __________ .

Departmentalizing decisions increases the risk of __________ leading to a poor decision.

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with __________ issues, it raises the possibility that poor decisions will result due to __________ .

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. What is the expected value of perfect information?

The term "suboptimization" is best described as the:

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with issues, it raises the possibility that poor decisions will result due to .