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States and Acts

Total questions: 40

Worksheet time: 40mins

Name
Class
Date
1.



 Which of the following best describes a payoff?

a)

A guaranteed profit

b)

The result of combining an act with a state

c)

A future probability

d)

A type of decision rule

2.

Which of the following is not a state of nature?

a)

High demand

b)

Low demand

c)

Investing in a new machine

d)

Market boom

3.

The Maximin criterion is preferred by:

a)

Highly optimistic people

b)

Risk-seeking people

c)

Risk-averse people

d)

People who know probabilities

4.

In the Minimax Regret method, regret is calculated as:

a)

Maximum payoff – minimum payoff

b)

The difference between chosen payoff and best payoff in each state

c)

The highest payoff in the entire table

d)

Expected value minus minimum payoff

5.

When probabilities are unknown, which criterion cannot be used?

a)

Maximax

b)

Maximin

c)

Expected Value

d)

Hurwicz

6.

 If a decision maker uses a high α (alpha) in the Hurwicz criterion, they are:

a)

Very pessimistic

b)

Very optimistic

c)

Completely risk-neutral

d)

Avoiding all risk

7.

Which decision environment involves one known and certain state of nature?

a)

Risk

b)

Uncertainty

c)

Certainty

d)

Regret

8.

A decision tree is mostly used in:

a)

Decision under certainty

b)

Decision under risk

c)

Decision under ignorance

d)

Maximin analysis

9.

A risk-neutral decision maker will choose the option with:

a)

Highest maximum payoff

b)

Highest minimum payoff

c)

Highest expected value

d)

Lowest regret

10.

In a payoff table, the rows usually represent:

a)

States of nature

b)

Probabilities

c)

Acts/alternatives

d)

Regrets

11.

In a payoff table, the columns usually represent:

a)

Acts

b)

States of nature

c)

Expected values

d)

Hurwicz coefficients

12.

Which of the following is true about states of nature?

a)

They are controlled by the decision maker

b)

They describe future uncertain events

c)

They are always equally likely

d)

They must be negative outcomes

13.

The criterion that combines best and worst outcomes using a weight is:

a)

Maximax

b)

Maximin

c)

Hurwicz

d)

Minimax Regret

14.

Which rule chooses the act that has the smallest best payoff?

a)

Maximax

b)

Minimax Regret

c)

Maximin

d)

None of the above

15.

The purpose of a decision criterion is to:

a)

Predict the future exactly

b)

Eliminate uncertainty

c)

Provide a logical rule for choosing an act

d)

Change probabilities

16.

What is an act in decision theory?

a)

A future event

b)

A choice available to the decision maker

c)

A possible outcome

d)

A probability distribution

17.

States of nature are:

a)

Uncontrollable future conditions

b)

Actions the manager can choose

c)

Guaranteed outcomes

d)

Expected values

18.

A payoff represents:

a)

The cost of collecting information

b)

A regret value

c)

A known future condition

d)

The result of an act–state combination

19.

Decisions under certainty involve:

a)

Multiple states with known probabilities

b)

Only negative outcomes

c)

One known state of nature

d)

Multiple states with unknown probabilities

20.

Decisions under risk involve:

a)

Unknown probabilities

b)

Only one possible outcome

c)

Known probabilities

d)

No payoff table

21.

Decisions under uncertainty involve:

a)

Probabilities associated with each state

b)

Unknown probabilities

c)

All outcomes equally likely

d)

No states of nature

22.

Which rule selects the highest possible payoff?

a)

Maximin

b)

Expected Value

c)

Maximax

d)

Minimax Regret

23.

A pessimistic decision maker would use:

a)

Maximin

b)

Maximax

c)

Minimax regret

d)

Hurwicz

24.

The Minimax Regret rule requires constructing:

a)

A payoff table

b)

A regret table

c)

Expected value chart

d)

A probability tree

25.

The Hurwicz criterion uses:

a)

Only the maximum payoff

b)

Only the minimum payoff

c)

Probabilities of states

d)

A weighted average of max and min

26.

Expected Value (EV) is used when:

a)

No probabilities are known

b)

Probabilities are known

c)

All states are controllable

d)

Payoffs are negative

27.

Which of the following is not a decision rule?

a)

Maximin

b)

Maximax

c)

Payoff Expansion

d)

Expected Value

28.

In a payoff table, rows typically contain:

a)

Acts

b)

States

c)

Probabilities

d)

Regrets

29.

In a payoff table, columns typically contain:

a)

Acts

b)

States

c)

Hurwicz coefficients

d)

Expected values

30.

A regret value is calculated as:

a)

Actual payoff – expected payoff

b)

Probability × payoff

c)

Minimum payoff – maximum payoff

d)

Maximum payoff in a state – payoff of an act in that state

31.

A risk-seeking individual prefers which rule?

a)

Maximin

b)

Minimax regret

c)

Maximax

d)

Expected value

32.

Which of the following is an example of a state of nature?

a)

Expand production

b)

Raise price

c)

High demand

d)

Launch new product

33.

A risk-neutral individual typically uses:

a)

Expected value

b)

Maximin

c)

Minimax regret

d)

Hurwicz with α = 1

34.

Which of the following is an example of a state of nature?

a)

Expand production

b)

High demand

c)

Raise price

d)

Launch new product

35.

. Which criterion considers both optimism and pessimism?

a)

Maximax

b)

Maximin

c)

Expected value

d)

Hurwicz

36.

What is the main purpose of decision criteria?

a)

To guarantee success

b)

To guide rational decision making under uncertainty

c)

To remove uncertainty

d)

To eliminate states of nature

37.

What is an Act in Decision Making?

a)

A future economic situation

b)

A choice the decision maker can take

c)

The highest payoff

d)

A probability of an event

38.

Decision under risk means:

a)

Probabilities known

b)

Only worst outcomes matter

c)

No states exist

d)

We must use Minimax

39.

High α (alpha) in Hurwicz means the decision maker is:

a)

Very pessimistic

b)

Very optimistic

c)

Probability-focused

d)

Risk-neutral

40.

What does regret measure?

a)

Minimum payoff

b)

Expected loss

c)

Loss compared to the best alternative

d)

Probability × payoff