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Instructions
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Feel free to ask clarification questions in the Test 1 discussion item.
-1 point if your name is not on your answer sheet.
4 points per item. 100 possible points.
Use calculators and computer software all you want.
For each item, submit only the letter of the best correct answer. Do not
submit details of your solution but have it available. I may ask for it. If
you think the item has no or more than one best correct answer, explain
why on the answer sheet.
6. Do not turn in this test paper. Submit the answer sheet only, by
copying and pasting into a course message, not an email.
**********
1) Which of the following terms is interchangeable with quantitative analysis?
A) management science
B) economics
C) financial analysis
D) statistics
E) None of the above
2) A(n) ________ is a representation of reality or a real-life situation.
A) objective
B) model
C) analysis
D) algorithm
E) None of the above
3) The condition of improper data yielding misleading results is referred to as
A) garbage in, garbage out.
B) break-even point.
C) uncontrollable variable.
D) postoptimality.
E) None of the above
4) What is the formula for the break-even point of a simple profit model?
A) Fixed Cost / Variable Cost Per Unit
B) (Selling Price Per Unit - Variable Cost Per Unit) / Fixed Cost
C) Fixed Cost / (Selling Price Per Unit - Variable Cost Per Unit)
D) Fixed Cost / (Variable Cost Per Unit - Selling Price Per Unit)
E) Selling Price Per Unit - (Fixed Cost / Variable Cost Per Unit)
5) As one attempts to develop a model, which of the following problems might she encounter?
A) The problem may not fit a textbook approach.
B) There will be no data available to test the model.
C) Not everyone will understand the problem in the same way.
D) All of the above
E) None of the above
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6) If two events are mutually exclusive, then
A) their probabilities can be added.
B) they may also be collectively exhaustive.
C) the joint probability is equal to 0.
D) if one occurs, the other cannot occur.
E) All of the above
7) Suppose that we determine the probability of a warm winter based on the number of warm winters
experienced over the past 10 years. In this case, we have used
A) relative frequency.
B) the classical method.
C) the logical method.
D) subjective probability.
E) None of the above
8) Bayes' theorem is used to calculate
A) revised probabilities.
B) joint probabilities.
C) prior probabilities.
D) subjective probabilities.
E) marginal probabilities.
9) If P(A) = 0.3, P(B) = 0.2, P(A and B) = 0.0, what can be said about events A and B?
A) They are independent.
B) They are mutually exclusive.
C) They are posterior probabilities.
D) None of the above
E) All of the above
10) A company is considering producing some new Gameboy electronic games. Based on past records,
management believes that there is a 70 percent chance that each of these will be successful, and a 30
percent chance of failure. Market research may be used to revise these probabilities. In the past, the
successful products were predicted to be successful based on market research 90 percent of the time.
However, for products that failed, the market research predicted these would be successes 20 percent of
the time. If market research is performed for a new product, what is the probability that the product will
be successful if the market research indicates a success?
A) 0.10
B) 0.90
C) 0.91
D) 0.63
E) 0.09
11) Which of the following is true about the expected value of perfect information?
A) It is the amount you would pay for any sample study.
B) It is calculated as EMV minus EOL.
C) It is calculated as expected value with perfect information minus maximum EMV.
D) It is the amount charged for marketing research.
E) None of the above
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12) The following is a payoff table giving profits for various situations.
What decision would an optimist make?
A) Alternative 1
B) Alternative 2
C) Alternative 3
D) Do Nothing
E) State of Nature A
13) The following is an opportunity loss table.
What decision should be made based on the minimax regret criterion?
A) Alternative 1
B) Alternative 2
C) Alternative 3
D) State of Nature A
E) Does not matter
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14) Dr. Mac, a surgeon, must decide what mode of treatment to use on Mr. Samuels. There are three
modes of treatment: Mode A, B, and C; and three possible states of nature: 1. Treatment succeeds and
patient leads a normal life, 2. Patient survives treatment but is permanently disabled, and 3. Patient fails
to survive treatment. Dr. Mac has prepared the decision table below. What mode of treatment maximizes
the expected value?
A) Mode A
B) Mode B
C) Mode C
D) All three treatments are equally desirable.
E) Normal Life
15) Bayes' theorem enables decision makers to revise probabilities based on
A) perfect information.
B) knowing, ahead of time, the actual outcome of the decision.
C) additional information.
D) measurements of utility.
E) None of the above
16) The saddle point in a payoff matrix is always the
A) largest number in its column and the largest number in its row.
B) largest number in its column and the smallest number in its row.
C) smallest number in its column and the largest number in its row.
D) smallest number in its column and the smallest number in its row.
E) None of the above
17) Consider the following two-person game. The payoff for X is given in the table. X will always play
strategy
X1
X2
Y1
4
Y2
6
1
-3
A) X1.
B) X2.
C) Y1.
D) Y2.
E) Not enough information given
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18) CleanClothes dry cleaners is opening a pick-up and delivery service. There is only one other dry
cleaner that currently offers this service. To advertise, CleanClothes is considering either newspaper ads
or attaching flyers to the doors of many local homes. The payoff for each of CleanClothes' potential
strategies is given in the table below. What strategy will the existing dry cleaners (Y) play?
X1 (newspaper ads)
X2 (flyers)
Y1 (newspaper ads)
52
Y2 (flyers)
37
26
18
A) X1
B) X2
C) Y1
D) Y2
E) Not enough information given
19) Considering the following two-person game, what percentage of the time should X play strategy X2?
X1
X2
Y1
6
Y2
3
2
8
A) 1/3
B) 2/3
C) 4/9
D) 5/9
E) None of the above
20) Given the following two-person game, which strategy can be eliminated by use of dominance?
X1
X2
X3
A) X1
B) X2
C) X3
D) Y1
E) Y2
Y1
13
Y2
9
6
8
12
14
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21) Which of the following statements is true regarding a scatter diagram?
A) It provides very little information about the relationship between the regression variables.
B) It is a plot of the independent and dependent variables.
C) It is a line chart of the independent and dependent variables.
D) It has a value between -1 and +1.
E) It gives the percent of variation in the dependent variable that is explained by the independent
variable.
22) The sum of squared error (SSE) is
A) a measure of the total variation in Y about the mean.
B) a measure of the total variation in X about the mean.
C) a measure in the variation of Y about the regression line.
D) a measure in the variation of X about the regression line.
E) None of the above
23) If computing a causal linear regression model of Y = a + bX and the resultant r2 is very near zero, then
one would be able to conclude that
A) Y = a + bX is a good forecasting method.
B) Y = a + bX is not a good forecasting method.
C) a multiple linear regression model is a good forecasting method for the data.
D) a multiple linear regression model is not a good forecasting method for the data.
E) None of the above
24) The diagram below illustrates data with a
A) negative correlation coefficient.
B) zero correlation coefficient.
C) positive correlation coefficient.
D) correlation coefficient equal to +1.
E) None of the above
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25) Which of the following statements provides the best guidance for model building?
A) If the value of r2 increases as more variables are added to the model, the variables should remain in
the model, regardless of the magnitude of increase.
B) If the value of the adjusted r2 increases as more variables are added to the model, the variables should
remain in the model.
C) If the value of r2 increases as more variables are added to the model, the variables should not remain
in the model, regardless of the magnitude of the increase.
D) If the value of the adjusted r2 increases as more variables are added to the model, the variables should
not remain in the model.
E) None of the statements provide accurate guidance.