At a Decision Point in a Decision Tree, Which Machine

question 19

Multiple Choice

At a decision point in a decision tree, which machine would you select when trying to maximize payoff when the anticipated benefit of selecting machine A is $45,000, with a probability of 90%; the expected benefit of selecting machine B is $80,000, with a probability of 50%; and the expected benefit of selecting machine C is $60,000, with a probability of 75%?

• A) Machine A
• B) Machine B
• C) Machine C
• D) You would be indifferent between machines A and C.
• E) You would be indifferent between machines A and B.

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Definitions:

Holt-Winters

A forecasting method that addresses seasonality by applying exponential smoothing to both the level and the trend of the data.

Qualitative Methods

Research techniques that collect data that is not in numerical form such as interviews, observations, and textual analysis.

Judgmental Forecasting

A forecasting method that relies on intuitive judgments, opinions, and subjective estimates rather than on rigorous mathematical models.

Shiller Real Home Price Index

An index that tracks changes in the price of residential real estate in the United States, adjusting for inflation.