Terms for midterms

Question 1

Use for problems involving the
allocation of resources to obtain
optimal effectiveness.

Answer 1

Allocation Model

Question 2

Mathematical programming is **the
broad term for tools that are used to
solve problems **in which the
decision-makers must allocate
limited resources among various
activities to optimize a managerial
objective. These tools include linear
programming and distribution model

Answer 2

Allocation Model

Question 3

refers to the property of having a
random probability distribution that
can be statistically analyzed but may
not be predicted accurately.

Answer 3

Stochastic Method (Probabilistic Model)

Question 4

are costs such as** rent, salaries,
advertising, and other overhead
costs** that remain the same no
matter how much of the product is
manufactured or sold.

Answer 4

Fixed Cost

Question 5

The s**implex method **which was
developed by **George B. Dantzig **
together with US Department of the
Airforce, is an iterative technique for
solving more unknown variables that
are geometrically difficult to plot in
the graph.

Answer 5

Albert Dantzig

Question 6

The consequences of
each alternative course of action can
be found at the intersection of a
given alternative and the
corresponding state of nature.

Answer 6

Payoffs

Question 7

presented at the top of the table are
the possible “—– – —–” or
called **events. **

Answer 7

State of Nature

Question 8

the problem as s1 s2 s3. —- — —- can also be presented as
rows.

Answer 8

State of Nature

Question 9

are given in
percentage and are usually placed
at the top of the table. The
assumption is that only one of the
given states of nature will happen n
the future. The sum of the
probabilities must be equal to 1.

Answer 9

Probabilities

Question 10

The most common approach to
solve decision-making—— is
the expected payoff criterion.

Answer 10

Decision Under Risk

Question 11

The decision-maker must select the
alternative with the —– ——
payoff.

Answer 11

The decision-maker must select the
alternative with the **highest expected **
payoff.

Question 12

The decision maker —- —-
situation, also called **“deterministic”
situation. **

Answer 12

Under Certainty

Question 13

The decision-maker** know with
certainty the consequence **of every
alternative or decision choice.

Answer 13

Under Certainty

Question 14

It is a perfect** predictor of the future **
because of the availability of
complete information, naturally they
will choose the alternative that has
the best result.

Answer 14

Under certainty

Question 15

the** decision-maker in this
situation can not estimate or does
not have knowledge** of the
probability of occurrence of possible
states of nature.

Answer 15

Under Uncertainty

Question 16

However, the situation should not be
considered “——” since
the states of nature are known.

Answer 16

Total ignorance

Question 17

Also called **Probabilistic or
Stochastic decision situations. **

Answer 17

Under Risk

Question 18

is presented
with several options with a
corresponding probability of
occurrence.

Answer 18

Under Risk

Question 19

• In this criterion, the decision-maker assumes that all states of nature
  have equal probabilities to occur.
• Then the highest expected payoff is
  selected.
• To compute for the expected payoffs,
  the probabilities of 1 3 will be applied
  to each of the 3 states of nature.

Answer 19

Laplace (Equal Likelihood)

Question 20

• most suitable
  for decision-makers who are neither
  completely pessimistic nor
  optimistic.
• To select the best alternative, the
  decision-maker will be using the
  degree of optimism called “alpha, a” which is measured on a 0 to 1 scale
  (where 0 = completely pessimistic
  and 1 = completely optimistic).
• The best alternative is the one with the highest weighted value (WV) for
  maximization problems.
• The main difficulty of using this
  criterion is the measurement of
  alpha

Answer 20

Hurwicz (The Criterion of Realism)

Question 21

• is based on the concept of
  Opportunity Lost, which
  means an opportunity loss is
  incurred whenever the
  decision overlooks the best
  alternative.
• Choosing the alternative with
  the minimum of all maximum
  regrets.
• Regret = Opportunity Lost – Payoff Received
  o This is done without the
  probabilities.

Answer 21

Regret

Question 22

**requirements or restrictions placed **
on the firm by the operating
environment, stated in linear
relationships of the decision
variables.

Answer 22

Constraints

Question 23

A variable added to the LHS of “Less
than or equal to” constraint to
convert it into an equality.

Answer 23

Slack Variables

Question 24

A** table which is used to keep track
of the calculations **made at each
iteration when the simplex method is
employed.

Answer 24

Simplex Tableau

Question 25

The **row corresponding to variable **
that will leave the table in order to
make room for another variable. It
contains the lowest quotient.

Answer 25

Pivotal Row

Question 26

**Element at the intersection **of pivotal
row and pivotal column.

Answer 26

Pivot

Question 27

Any basic feasible solution which
optimizes (maximizes or minimizes)
the objective function.

Answer 27

Optimal Solution

Question 28

is appropriate for small problems
dealing with 2 decision variables and
with few constraints.

Answer 28

Graphical Method