Chapter 05S
Supplement: Decision Theory
True / Fal Questions
1. Decision trees, with their predetermined analysis of a situation, are really not uful in making health care decisions since every person is unique.
FALSE
AACSB: RT
Difficulty: Easy
TLO: 1
Taxonomy: Synthesis
2. Bounded rationality refers to the limits impod on decision-making becau of costs, human abilities, time, technology, and/or availability of information.
TRUE
Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
3. In reaching a decision, the alternative with the lowest cost should be ranked #1.
FALSE
Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
4. The expected monetary value approach is most appropriate when the decision-maker is risk-neutral.
TRUE
Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
5. The value of perfect information is inverly related to loss predicted.
FALSE
Difficulty: Hard
TLO: 5
Taxonomy: Knowledge
6. Expected monetary value gives the long-run average payoff if a large number of identical decisions could be made.
TRUE
Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
7. Among decision environments, risk implies that certain parameters have probabilistic outcomes.
TRUE
Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
8. Among decision environments, uncertainty implies that states of nature have wide ranging probabilities associated with them.
FALSE
Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
9. In decision theory, states of nature refer to possible future conditions.
TRUE
Difficulty: Easy
TLO: 1
Taxonomy: Knowledge
10. The maximin approach involves choosing the alternative with the highest payoff. FALSE
Difficulty: Hard
TLO: 2
Taxonomy: Knowledge
11. The maximin approach involves choosing the alternative that has the "best worst" payoff. TRUE
Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
12. The Laplace criterion treats states of nature as being equally likely.
TRUE
Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
13. The maximax approach is a pessimistic strategy.
FALSE
Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
14. A weakness of the maximin approach is that it los some information.
TRUE
Difficulty: Medium
TLO: 2
Taxonomy: Knowledge
15. The expected value approach applies to decision-making under uncertainty.
FALSE
Difficulty: Medium
TLO: 3
Taxonomy: Knowledge
16. The expected value approach is ud for decision-making under risk.
TRUE
Difficulty: Easy
TLO: 3
Taxonomy: Knowledge
17. The EVPI indicates an upper limit on the amount a decision-maker should be willing to spend to obtain additional information.
TRUE
AACSB: RT
Difficulty: Hard
TLO: 3
Taxonomy: Synthesis
18. Graphical nsitivity analysis is limited to cas with no more than two alternatives. FALSE
Difficulty: Hard
TLO: 6
Taxonomy: Knowledge
19. Graphical nsitivity analysis is ud for decision-making under risk.
TRUE
Difficulty: Medium
TLO: 6
Taxonomy: Knowledge
20. An advantage of decision trees compared to payoff tables is that they permit us to analyze situations involving quential decisions.
TRUE
Difficulty: Medium
TLO: 4
Taxonomy: Knowledge
Multiple Choice Questions
21. The term sub-optimization is best described as the:
A. result of individual departments making the best decisions for their own areas
B. limitations on decision-making caud by costs and time
C. result of failure to adhere to the steps in the decision process
D. result of ignoring symptoms of the problem
E. none of the above
Difficulty: Medium
TLO: 1
Taxonomy: Knowledge
