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Exam 5: Strategic Capacity Planning for Products and Services

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Question 61

Multiple Choice

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If the minimum expected regret is computed, it indicates to a decision maker the expected:

A) value of perfect information.
B) payoff under certainty.
C) monetary value.
D) payoff under risk.
E) risk-seeking.

F) A) and C)
G) All of the above

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Question 62

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The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars) will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high. If she uses the maximax criterion, how many beauticians will she decide to hire?

A) one
B) two
C) three
D) either one or two
E) either two or three

F) A) and C)
G) C) and D)

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Question 63

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The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, medium, or high, as follows: If he uses the maximin criterion, which size bus will he decide to purchase?

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies. What is the probability that the statistics book would wind up being placed with a smaller publisher?

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: For what range of probability that demand will be high, will she decide to lease the small facility?

Capacity planning requires an analysis of needs: what kind, how much, and when.

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

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

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

Capacity decisions are usually one-time decisions; once they have been made, we know the limits of our operations.

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

Capacity in excess of expected demand that is intended to offset uncertainty is a:

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows: If she uses the maximax criterion, which advertising strategy will she use?

A decision maker's worst option has an expected value of $2,550, and the decision maker's best option has an expected value of $4,750. With perfect information, the expected value would be $6,000. The decision maker has received an offer from a banking firm that will make their position risk-free for a fee of $600. How much better off will the decision maker be if they take the offer?

Consider the following decision scenario: *PV for profits ($000) The minimax regret strategy would be:

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows: If she uses the minimax regret criterion, how many new examiners will she decide to hire?

Efficiency is defined as the ratio of:

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, medium, or high, as follows: If he uses the minimax regret criterion, which size bus will he decide to purchase?

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows: If she uses the Laplace criterion, how many new examiners will she decide to hire?

The difference between expected payoff under certainty and expected payoff under risk is the expected: