Managerial Decision Making Exam Preparation Guide
Course
Introduction
Managerial Decision Making explores the theories, processes, and tools that managers use to make effective choices in complex, uncertain environments. The course examines both individual and group decision-making, highlighting cognitive biases, risk assessment, and the impact of organizational culture. Students will analyze real-world case studies, learn quantitative and qualitative decision-making techniques, and develop skills to balance analytical reasoning with intuition. The course prepares future managers to address ethical dilemmas, consider stakeholders, and implement decisions that drive organizational success.
Recommended Textbook
Quantitative Methods for Business 11th Edition by David R. Anderson
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17 Chapters
845 Verified Questions
845 Flashcards
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Chapter 1: Introduction
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Sample Questions
Q1) A company seeks to maximize profit subject to limited availability of man-hours.Man-hours is a controllable input.
A)True
B)False
Answer: False
Q2) A model that uses a system of symbols to represent a problem is called A)mathematical. B)iconic. C)analog.
D)constrained.
Answer: A
Q3) The first step in the decision making process is to identify the problem.
A)True
B)False
Answer: True
Q4) The decision making process includes implementation and evaluation of the decision.
A)True
B)False Answer: False
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Chapter 2: Introduction to Probability
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Q1) When the results of experimentation or historical data are used to assign probability values,the method used to assign probabilities is referred to as the
A)relative frequency method
B)subjective method
C)classical method
D)posterior method
Answer: A
Q2) If P(A\(\cup\)B)= P(A)+ P(B),then A and B are mutually exclusive.
A)True
B)False
Answer: True
Q3) A posterior probability is a conditional probability.
A)True
B)False
Answer: True
Q4) If P(A|B)= .4 and P(B)= .6,then P(A\(\cap\)B)= .667.
A)True
B)False Answer: False
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Chapter 3: Probability Distributions
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Sample Questions
Q1) A process follows the binomial distribution with n = 8 and p = .3.Find
a.P(x = 3)
b.P(x > 6)
c.P(x \(\le\) 2)
Answer: a.2541
b.0013
c.5518
Q2) Weight,time,and temperature are examples of discrete random variables.
A)True
B)False
Answer: False
Q3) Experiments with repeated independent trials will be described by the binomial distribution if
A)the trials are continuous.
B)each trial result influences the next.
C)the time between trials is constant.
D)each trial has exactly two outcomes whose probabilities do not change.
Answer: D
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Chapter 4: Decision Analysis
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Sample Questions
Q1) States of nature
A)can describe uncontrollable natural events such as floods or freezing temperatures.
B)can be selected by the decision maker.
C)cannot be enumerated by the decision maker.
D)All of the alternatives are true.
Q2) Maximizing the expected payoff and minimizing the expected opportunity loss result in the same recommended decision.
A)True
B)False
Q3) Making a good decision
A)requires probabilities for all states of nature.
B)requires a clear understanding of decision alternatives,states of nature,and payoffs.
C)implies that a desirable outcome will occur.
D)All of the alternatives are true.
Q4) Square nodes in a decision tree indicate that a decision must be made.
A)True
B)False
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6
Chapter 5: Utility and Game Theory
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Sample Questions
Q1) The purchase of insurance and lottery tickets shows that people make decisions based on
A)expected value.
B)sample information.
C)utility.
D)maximum likelihood.
Q2) If the maximin and minimax values are not equal in a two-person zero-sum game,
A)a mixed strategy is optimal.
B)a pure strategy is optimal.
C)a dominated strategy is optimal.
D)one player should use a pure strategy and the other should use a mixed strategy.
Q3) If the payoff from outcome A is twice the payoff from outcome B,then the ratio of these utilities will be
A)2 to 1.
B)less than 2 to 1.
C)more than 2 to 1.
D)unknown without further information.
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Page 7
Chapter 6: Forecasting
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Sample Questions
Q1) Trend in a time series must be linear.
A)True
B)False
Q2) A qualitative forecasting method that obtains forecasts through "group consensus" is known as the
A)Autoregressive model
B)Delphi approach
C)mean absolute deviation
D)None of these alternatives is correct.
Q3) Exponential smoothing with \(\alpha\)=.2 and a moving average with n = 5 put the same weight on the actual value for the current period.
A)True
B)False
Q4) The multiplicative model
A)uses centered moving averages to smooth the trend fluctuations.
B)removes trend before isolating the seasonal components.
C)deseasonalizes a time series by dividing the values by the appropriate seasonal index.
D)provides a unique seasonal index for each observation of the time series.
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Chapter 7: Introduction to Linear Programming
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Sample Questions
Q1) Muir Manufacturing produces two popular grades of commercial carpeting among its many other products.In the coming production period,Muir needs to decide how many rolls of each grade should be produced in order to maximize profit.Each roll of Grade X carpet uses 50 units of synthetic fiber,requires 25 hours of production time,and needs 20 units of foam backing.Each roll of Grade Y carpet uses 40 units of synthetic fiber,requires 28 hours of production time,and needs 15 units of foam backing. The profit per roll of Grade X carpet is $200 and the profit per roll of Grade Y carpet is $160.In the coming production period,Muir has 3000 units of synthetic fiber available for use.Workers have been scheduled to provide at least 1800 hours of production time (overtime is a possibility).The company has 1500 units of foam backing available for use. Develop and solve a linear programming model for this problem.
Q2) In a linear programming problem,the objective function and the constraints must be linear functions of the decision variables.
A)True
B)False
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Chapter 8: Lp Sensitivity Analysis and Interpretation of Solution
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Sample Questions
Q1) Any change to the objective function coefficient of a variable that is positive in the optimal solution will change the optimal solution.
A)True
B)False
Q2) For any constraint,either its slack/surplus value must be zero or its dual price must be zero.
A)True
B)False
Q3) The reduced cost for a positive decision variable is 0. A)True B)False
Q4) Sensitivity analysis information in computer output is based on the assumption of A)no coefficient change. B)one coefficient change. C)two coefficient change. D)all coefficients change.
Q5) There is a dual price for every decision variable in a model. A)True B)False
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Chapter 9: Linear Programming Applications
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Sample Questions
Q1) Portfolio selection problems should acknowledge both risk and return.
A)True
B)False
Q2) To properly interpret dual prices,one must know how costs were allocated in the objective function.
A)True
B)False
Q3) For the multiperiod production scheduling problem in the textbook,period n - 1's ending inventory variable was also used as period n's beginning inventory variable.
A)True
B)False
Q4) Revenue management methodology was originally developed for the banking industry.
A)True
B)False
Q5) If a real-world problem is correctly formulated,it is not possible to have alternative optimal solutions.
A)True
B)False
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Chapter 10: Distribution and Network Problems
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Sample Questions
Q1) A transshipment problem is a generalization of the transportation problem in which certain nodes are neither supply nodes nor destination nodes.
A)True
B)False
Q2) A transshipment constraint must contain a variable for every arc entering or leaving the node.
A)True
B)False
Q3) When a route in a transportation problem is unacceptable,the corresponding variable can be removed from the LP formulation.
A)True
B)False
Q4) In the general assignment problem,one agent can be assigned to several tasks.
A)True
B)False
Q5) The direction of flow in the shortest-route problem is always out of the origin node and into the destination node.
A)True
B)False
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Chapter 11: Integer Linear Programming
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Sample Questions
Q1) The graph of a problem that requires x<sub>1</sub> and x<sub>2</sub> to be integer has a feasible region
A)the same as its LP relaxation.
B)of dots.
C)of horizontal stripes.
D)of vertical stripes.
Q2) Let x<sub>1</sub> ,x<sub>2</sub> ,and x<sub>3</sub> be 0 - 1 variables whose values indicate whether the projects are not done (0)or are done (1).Which answer below indicates that at least two of the projects must be done?
A)x<sub>1</sub> + x<sub>2</sub> + x<sub>3</sub> > 2
B)x<sub>1</sub> + x<sub>2</sub> + x<sub>3</sub> < 2
C)x<sub>1</sub> + x<sub>2</sub> + x<sub>3</sub> = 2
D)x<sub>1</sub> - x<sub>2</sub> = 0
Q3) Most practical applications of integer linear programming involve
A)only 0-1 integer variables and not ordinary integer variables.
B)mostly ordinary integer variables and a small number of 0-1 integer variables.
C)only ordinary integer variables.
D)a near equal number of ordinary integer variables and 0-1 integer variables.
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Chapter 12: Advanced Optimization Application
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Sample Questions
Q1) In portfolio models,risk is minimized by diversification.
A)True
B)False
Q2) Revenue management methodology enables an airline to maximize the number of full-fare seats it sells on each flight.
A)True
B)False
Q3) To develop a portfolio that provides the best return possible with a minimum risk,the linear programming model will have an objective function which A)minimizes the maximum risk.
B)minimizes total risk.
C)maximizes return and minimizes risk.
D)maximizes the minimum return.
Q4) If the coefficient of each squared term in a quadratic function is positive,the function is
A)concave.
B)convex.
C)elliptical.
D)sinusoidal.
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Chapter 13: Project Scheduling: Pertcpm
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Q1) The latest finish time for an activity is the largest of the latest start times for all activities that immediately follow the activity.
A)True
B)False
Q2) For an activity with more than one immediate successor activity,its latest-finish time is equal to the
A)largest latest-finish time among its immediate successors.
B)smallest latest-finish time among its immediate successors.
C)largest latest-start time among its immediate successors.
D)smallest latest-start time among its immediate successors.
Q3) Activities G,P,and R are the immediate predecessors for activity W.If the earliest finish times for the three are 12,15,and 10,then the earliest start time for W
A)is 10.
B)is 12.
C)is 15.
D)cannot be determined.
Q4) The earliest finish time for the final activity is the project duration.
A)True B)False
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Chapter 14: Inventory Models
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Sample Questions
Q1) Kelly's Service Station does a large business in tune-ups.Demand has been averaging 210 spark plugs per week.Holding costs are $.01 per plug per week and reorder costs are estimated at $10 per order.
Kelly does not want to be out of stock on more than 1% of his orders.There is a one-day delivery time.The standard deviation of demand is five plugs per day.Assume a normal distribution of demand during lead time and a 7-day work week.
a.What inventory policy do you suggest for Kelly's station?
b.What is the average amount of safety stock for the reorder point in (a)?
c.What are the total variable weekly costs including safety stock costs?
Q2) Daily demand for packages of five videotapes at a warehouse store is found to be normally distributed with mean 50 and standard deviation 5.When the store orders more tapes,the ordering cost is $42 and the orders take 4 days to arrive.Each pack of tapes costs $7.20 and there is a 24% annual holding cost for inventory.Assume the store is open 360 days a year.
a.What is the EOQ?
b.If the store wants the probability of stocking out to be no more than 5%,and demand each day is independent of the day before,what reorder point should be set?
c.How much of your reorder point in part b)is safety stock?
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Chapter 15: Waiting Line Models
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Sample Questions
Q1) For many waiting line situations,the arrivals occur randomly and independently of other arrivals and it has been found that a good description of the arrival pattern is provided by
A)a normal probability distribution.
B)an exponential probability distribution.
C)a uniform probability distribution.
D)a Poisson probability distribution.
Q2) For an M/M/k system,the average number of customers in the system equals the customer arrival rate times the average time a customer spends waiting in the system.
A)True
B)False
Q3) For all waiting lines,P<sub>0</sub> + P<sub>w</sub> = 1.
A)True B)False
Q4) Queue discipline refers to the manner in which waiting units are arranged for service.
A)True
B)False
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Chapter 16: Simulation
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Q1) Simulation is an optimization technique.
A)True
B)False
Q2) A discrete-event simulation reviews the status of the system periodically,whether or not an event occurs.
A)True
B)False
Q3) Verification is the process of ensuring that the simulation model provides an accurate representation of the real system.
A)True
B)False
Q4) The parameters of a simulation model are the controllable inputs.
A)True
B)False
Q5) When events occur at discrete points in time
A)a simulation clock is required.
B)the simulation advances to the next event.
C)the model is a discrete-event simulation.
D)All of the alternatives are correct.
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Chapter 17: Markov Processes
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Sample Questions
Q1) A state i is an absorbing state if p<sub>ii</sub> = 0.
A)True
B)False
Q2) Markov processes use historical probabilities.
A)True
B)False
Q3) The fundamental matrix is used to calculate the probability of the process moving into each absorbing state.
A)True
B)False
Q4) The probability that the system is in state 2 in the 5th period is \(\pi\)<sub>5</sub>(2).
A)True
B)False
Q5) Transition probabilities are conditional probabilities.
A)True
B)False
Q6) All Markov chain transition matrices have the same number of rows as columns. A)True
B)False
Page 19
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