Business Decision Modeling Exam Preparation Guide
Course Introduction
Business Decision Modeling explores the application of quantitative modeling techniques to support and enhance managerial decision-making processes. The course covers a variety of decision models, including optimization, simulation, and decision analysis, using tools such as linear programming, Monte Carlo simulation, and decision trees. Students learn to formulate real-world business problems into mathematical models, analyze alternatives, interpret results, and make data-driven recommendations. The emphasis is on practical applications in areas such as operations, finance, marketing, and supply chain management, utilizing software to solve complex problems and improve organizational performance.
Recommended Textbook
Business Analytics Data Analysis and Decision Making 5th Edition by S. Christian Albright
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Chapter 1: Introduction to Data Analysis and Decision Making
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Q1) Data analysis includes data description,data inference,and the search for relationships in data.
A)True
B)False
Answer: True
Q2) Which of the following statements are true?
A) Three important themes run through the book.Two of them are in the title: data analysis and decision making.The third is dealing with uncertainty.
B) Data analysis includes data description,data inference,and the search for relationships in data.
C) Decision making includes optimization techniques for problems with no uncertainty,decision analysis for problems with uncertainty,and structured sensitivity analysis.
D) Dealing with uncertainty includes measuring uncertainty and modeling uncertainty explicitly into the analysis.
E) All of these options
Answer: E
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Chapter 2: Describing the Distribution of a Single Variable
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Q1) In the term "frequency table," frequency refers to the counts of observations in specified categories.
A)True
B)False
Answer: True
Q2) Expressed in percentiles,the interquartile range is the difference between the
A) 10<sup>th</sup> and 60<sup>th</sup> percentiles
B) 15<sup>th</sup> and 65<sup>th</sup> percentiles
C) 20<sup>th</sup> and 70<sup>th</sup> percentiles
D) 25<sup>th</sup> and 75<sup>th</sup> percentiles
E) 35<sup>th</sup> and 85<sup>th</sup> percentiles
Answer: D
Q3) A variable (or field or attribute)is a characteristic of members of a population,whereas an observation (or case or record)is a list of all variable values for a single member of a population.
A)True
B)False
Answer: True
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Chapter 3: Finding Relationships Among Variables
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Q1) The correlation between two variables is a unitless and is always between -1 and +1.
A)True
B)False
Answer: True
Q2) Correlation and covariance can be used to examine relationships between numerical variables as well as for categorical variables that have been coded numerically.
A)True
B)False
Answer: False
Q3) Displaying all correlations between 0.6 and 0.999 on a scatterplot as green and all correlations between -1.0 and -0.6 as red is known as
A) rank-order formatting
B) categorical formatting
C) coded formatting
D) numerical formatting
E) conditional formatting
Answer: C
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Chapter 4: Probability and Probability Distributions
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Sample Questions
Q1) The probabilities shown in a table with two rows, \(A _ { 1 } \text { and } A _ { 2 }\)
And two columns, \(B _ { 1 } \text { and } B _ { 2 }\)
,are as follows: \(P \left( A _ { 1 } \text { and } B _ { 1 } \right) = .10\)
, \(P \left( A _ { 1 } \text { and } B _ { 2 } \right) = .30\)
, \(P \left( A _ { 2 } \text { and } B _ { 1 } \right) = .05\)
,and \(P \left( A _ { 2 } \text { and } B _ { 2 } \right) = .55\)
)Then \(P \left( A _ { 1 } \mid B _ { 2 } \right)\)
,calculated up to two decimals,is
A) .33
B) .35
C) .65
D) .67
Q2) Which of the following statements are true?
A) Probabilities must be negative
B) Probabilities must be greater than 1
C) The sum of all probabilities for a random variable must be equal to 1
D) All of these options are true.
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Chapter 5: Normal, Binomial, Poisson, and Exponential
Distributions
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Q1) The variance of a binomial distribution for which n = 50 and p = 0.20 is 8.0.
A)True
B)False
Q2) A random variable X is standardized when each value of X has the mean of X subtracted from it,and the difference is divided by the standard deviation of X.
A)True
B)False
Q3) The binomial distribution is a continuous distribution that is not far behind the normal distribution in order of importance.
A)True
B)False
Q4) If the random variable X is normally distributed with mean \(\mu\) and standard deviation \(\sigma\) ,then the random variable Z defined by \(Z = ( X - \mu ) / \sigma\) is also normally distributed with mean 0 and standard deviation 1.
A)True
B)False
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Chapter 6: Decision Making Under Uncertainty
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Sample Questions
Q1) Expected monetary value (EMV)is:
A) the average or expected value of the decision if you knew what would happen ahead of time
B) the weighted average of possible monetary values,weighted by their probabilities
C) the average or expected value of the information if it was completely accurate
D) the amount that you would lose by not picking the best alternative
E) a decision criterion that places an equal amount on all states of nature
Q2) The certainty equivalent is the certain dollar amount a risk-averse decision maker would accept in order to avoid a gamble altogether.
A)True
B)False
Q3) If all monetary values in a decision problem are costs,then it is customary to list them as __________ values in a cost table.
A) positive
B) negative
C) either positive or negative
D) All of these options
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Chapter 7: Sampling and Sampling Distributions
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Sample Questions
Q1) A sampling error is the result of:
A) measurement error
B) nonresponse bias
C) nontruthful responses
D) bad luck
Q2) A list of all members of the population is called a:
A) sampling unit
B) probability sample
C) frame
D) relevant population
Q3) A probability sample is a sample in which the sampling units are chosen from the population by means of a random mechanism such as a random number table.
A)True
B)False
Q4) In stratified sampling with proportional sample sizes,the proportion of each stratum selected differs from stratum to stratum.
A)True
B)False
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Chapter 8: Confidence Interval Estimation
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Q1) When the samples we want to compare are paired in some natural way,such as pretest/posttest for each person or husband/wife pairs,a more appropriate form of analysis is to not compare two separate variables,but their .
A) difference
B) sum
C) ratio
D) total
E) product
Q2) The mean of the sampling distribution of the sample proportion \(\hat { p }\) ,when the sample size n = 100 and the population proportion p = 0.15,is 15.0.
A)True
B)False
Q3) If we cannot make the strong assumption that the variances of two samples are equal,then we must use the pooled standard deviation in calculating the standard error of a difference between the means.
A)True
B)False
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Chapter 9: Hypothesis Testing
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Sample Questions
Q1) A chi-square goodness-of-fit test can be used to test for normality.
A)True
B)False
Q2) Which of the following values is not typically used for \(a\) ?
A) 0.01
B) 0.05
C) 0.10
D) 0.50
Q3) An alternative or research hypothesis is usually the hypothesis a researcher wants to prove.
A)True
B)False
Q4) A test with a 0.10 significance level has a larger rejection region than a test with a 0.05 significance level.
A)True
B)False
Q5) A Q-Q plot can be used to test for normality.
A)True
B)False
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Chapter 10: Regression Analysis: Estimating Relationships
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Q1) In every regression study there is a single variable that we are trying to explain or predict.This is called the response variable or dependent variable.
A)True
B)False
Q2) is/are especially helpful in identifying outliers.
A) Linear regression
B) Regression analysis
C) Normal curves
D) Scatterplots
E) Multiple regression
Q3) In a simple regression analysis,if the standard error of estimate \(s _ { e }\) = 15 and the number of observations n = 10,then the sum of the residuals squared must be 120.
A)True
B)False
Q4) Regression analysis can be applied equally well to cross-sectional and time series data.
A)True B)False
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Chapter 11: Regression Analysis: Statistical Inference
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Q1) When the error variance is nonconstant,it is common to see the variation increases as the explanatory variable increases (you will see a "fan shape" in the scatterplot).There are two ways you can deal with this phenomenon.These are:
A) the weighted least squares and a logarithmic transformation
B) the partial F and a logarithmic transformation
C) the weighted least squares and the partial F
D) stepwise regression and the partial F
Q2) Multicollinearity is a situation in which two or more of the explanatory variables are highly correlated with each other.
A)True
B)False
Q3) A point that "tilts" the regression line toward it,is referred to as a(n):
A) magnetic point
B) influential point
C) extreme point
D) explanatory point
Q4) In regression analysis,homoscedasticity refers to constant error variance.
A)True
B)False
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Chapter 12: Time Series Analysis and Forecasting
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Q1) To calculate the five-period moving average for a time series,we average the values in the two preceding periods,and the values in the three following time periods.
A)True
B)False
Q2) Holt's method is an exponential smoothing method,which is appropriate for a series with seasonality and possibly a trend.
A)True
B)False
Q3) If the span of a moving average is large - say,12 months - then few observations go into each average,and extreme values have relatively large effect on the forecasts.
A)True
B)False
Q4) Models such as moving average,exponential smoothing,and linear trend use only:
A) future values of Y to forecast previous values of Y
B) previous values of Y to forecast future values of Y
C) multiple explanatory variables (not just values of Y)to forecast future values of Y
D) ratio-to-moving-average methods
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Chapter 13: Introduction to Optimization Modeling
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Sample Questions
Q1) In some cases,a linear programming problem can be formulated such that the objective can become infinitely large (for a maximization problem)or infinitely small (for a minimization problem).This type of problem is said to be:
A) infeasible
B) inconsistent
C) unbounded
D) redundant
Q2) Consider the following linear programming problem:
Maximize \(2 x _ { 1 } + 4 x _ { 2 }\)
Subject to \(x _ { 1 } + x _ { 2 } \leq 5\)
\(- x _ { 1 } + x _ { 2 } \geq 8\)
\(x _ { 1 } , x _ { 2 } \geq 0\)
The above linear programming problem:
A) has only one optimal solution
B) has more than one optimal solution
C) exhibits infeasibility
D) exhibits unboundedness
Q3) There is often more than one objective in linear programming problems
A)True
B)False
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Chapter 14: Optimization Models
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Sample Questions
Q1) A common characteristic of integer programming models is that they:
A) are easy to solve graphically
B) produce the same answer and standard linear programming models
C) often produce multiple optimal solutions
D) all of these options
Q2) The problem which deals with the direct distribution of products from supply locations to demand locations is called a(n)
A) transportation problem
B) assignment problem
C) network problem
D) transshipment problem
Q3) Rounding the solution of a linear programming to the nearest integer values provides a(n)
A) integer solution that is optimal
B) integer solution that may be neither feasible nor optimal
C) feasible solution that is not necessarily optimal
D) infeasible solution
Q4) A global optimal solution is not necessarily the best solution overall. A)True
B)False
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Chapter 15: Introduction to Simulation Modeling
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Sample Questions
Q1) The "random" numbers generated by the RAND function (or by any other package's random number generator)are not really random.
A)True
B)False
Q2) Different random numbers generated by the computer are probabilistically dependent.This implies that when we generate a random number in a particular cell,it has some effect on the values of any other random numbers generated in the spreadsheet.
A)True
B)False
Q3) A correlation matrix must always be symmetric,so that the correlations above the diagonal are a mirror image of those below it.
A)True
B)False
Q4) Simulation models are particularly useful for:
A) forecasting.
B) obtaining deterministic outputs.
C) evaluating constraints.
D) asking what-if questions.
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Chapter 16: Simulation Models
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Q1) Which of the following is not among the financial applications where simulation can be applied?
A) Future stock prices
B) Customer preferences for different attributes of products
C) Future interest rates
D) Future cash flows
E) None of these options
Q2) In financial simulation models,we are typically more interested in the expected NPV of a project than in the extremes of the outcomes.
A)True
B)False
Q3) Which of the following distributions is most likely to be used to develop a simulation model for estimating the time until failure of a product in a simulation model?
A) Binomial
B) Gamma
C) Normal
D) Chi-square
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Chapter 17: Data Mining
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Sample Questions
Q1) What does the pivot table indicate about spending habits?
Q2) In a facts table,a supermarket database is likely to have which item listed in rows?
A) The number of units sold
B) Revenue generated from a particular unit
C) The department in which the unit was purchased
D) The individual items purchased
Q3) A facts table has:
A) few rows and many columns
B) many rows and many columns
C) many rows and few columns
D) few rows and few columns
Q4) Clustering is considered a supervised data mining technique.
A)True
B)False
Q5) If the estimate on the female variable is positive,what does this indicate about credit card usage?
Q6) Create a pivot table that illustrates something meaningful about the variables in the accompanying table.
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Chapter 18: Importing Data Into Excel
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Sample Questions
Q1) The data in the accompanying figure was imported using "Text Import Wizard." How did the first three rows of text data appear in the text file prior to importing?
Q2) ASCII files are text files that can be opened and read in a text editor such as Notepad.
A)True
B)False
Q3) Real-world datasets usually do not require any cleansing because they do not contain missing data or typographical errors.
A)True
B)False
Q4) Angela is importing a string of data that includes five-digit zip codes for 500 cities.This text file is considered:
A) neither fixed nor delimited
B) fixed or delimited
C) delimited
D) fixed width
Q5) If you had imported the data using 'fixed width,' how would the output have changed?
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Chapter 19: Analysis of Variance and Experimental Design
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Q1) In a designed experiment,researchers control for various factors such as age,gender,or socioeconomic status.
A)True
B)False
Q2) What is the logical next step once Mook Corp.has identified that workers attending different training programs have different productivity levels?
Q3) In a full factorial design,researchers assign experimental units to each treatment level combination.
A)True
B)False
Q4) Moriah runs a one-way ANOVA to test differences in means in delivery time.The SSB is 109,400 and the total sum of squares is 715,460.What is the value of the SSW?
A) -606,060
B) 218,800
C) 606,060
D) 824,860
Q5) What does the ANOVA output in the accompanying figure indicate?
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Chapter 20: Statistical Process Control
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Sample Questions
Q1) Taveen,the production manager at Wire Express,has noticed that one of his machines seems to stall out briefly toward the end of a run.He is wondering whether this stalling is affecting the width of the wire product.He creates several control charts and notices about four consecutive points above the centerline and one point beyond two standard deviations from the centerline.How should Taveen react?
Q2) Morgan is now using a smaller sample size,but she has forgotten to adjust the upper and lower limits to reflect the smaller sample size.What is likely to occur as she manually plots observations on the chart?
Q3) Morgan decided the out-of-control behavior she observed might be due to the fact that she was using an extremely small sample.Therefore,she quadruples her sample size,and the sample is now much larger than even her original sample.Unfortunately,she forgets to adjust the upper and lower limits again to reflect the much larger sample size.What is likely to occur as she manually plots observations on the chart?
Q4) Which of the following is not one of Deming's 14 Points?
A) Use Lowest-Tender Contracts.
B) Have Constancy of Purpose.
C) Institute Leadership of People.
D) Break Down Barriers.
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