Decision Modeling Review Questions
Course Introduction
Decision Modeling explores the principles and techniques used to support effective decision-making in complex, real-world scenarios. The course emphasizes the construction and analysis of mathematical models including optimization, simulation, and decision analysis to address business and management problems. Students learn to translate practical issues into quantifiable models, apply relevant software tools, and interpret model outputs to recommend data-driven actions. Through case studies and hands-on projects, the course develops skills in structuring decisions, evaluating trade-offs, and implementing systematic decision processes across various organizational contexts.
Recommended Textbook
Business Analytics Data Analysis and Decision Making 5th Edition by S. Christian Albright
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Page 2
Chapter 1: Introduction to Data Analysis and Decision Making
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Sample Questions
Q1) Which of the following statements are false?
A) Decision-making includes optimization techniques for problems with certainty,decision analysis for problems with certainty,and structured sensitivity analysis.
B) Graphical models can be very helpful for simple problems.For complex problems,however,graphical models usually fail to show the important elements of a problem and how they are related.
C) Dealing with uncertainty includes measuring uncertainty and modeling uncertainty explicitly into the analysis.
D) All of these options
Answer: B
Q2) Which of the following is not one of the steps in the modeling process?
A) Select scale for model.
B) Collect and summarize data.
C) Verify the model.
D) Present the results to the organization.
E) Implement the model and update it over time.
Answer: A
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Chapter 2: Describing the Distribution of a Single Variable
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Sample Questions
Q1) A variable is classified as ordinal if
A) there is a natural ordering of categories
B) there is no natural ordering of categories
C) the data arise from continuous measurements
D) we track the variable through a period of time
Answer: A
Q2) As a graphical tool,the histogram is ideal for showing whether the distribution of a numerical variable is symmetric or skewed.
A)True
B)False
Answer: True
Q3) Mean absolute deviation (MAD)is the average of the squared deviations.
A)True
B)False
Answer: False
Q4) Categorical variables can be classified as either discrete or continuous.
A)True
B)False Answer: False
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Chapter 3: Finding Relationships Among Variables
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Sample Questions
Q1) If the coefficient of correlation r = 0 .80,the standard deviations of X and Y are 20 and 25,respectively,then Cov(X,Y)must be 400.
A)True
B)False
Answer: True
Q2) If the standard deviations of X and Y are 15.5 and 10.8,respectively,and the covariance of X and Y is 128.8,then the coefficient of correlation r is approximately 0.77.
A)True
B)False
Answer: True
Q3) The correlation between two variables is a unitless and is always between -1 and +1. A)True
B)False Answer: True
Q4) The cutoff for defining a large correlation is A)True
B)False
Answer: False
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Chapter 4: Probability and Probability Distributions
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Sample Questions
Q1) Probabilities that cannot be estimated from long-run relative frequencies of events are
A) objective probabilities
B) subjective probabilities
C) complementary probabilities
D) joint probabilities
Q2) 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
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Chapter 5: Normal, Binomial, Poisson, and Exponential
Distributions
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Sample Questions
Q1) The Poisson probability distribution is one of the most commonly used continuous probability distributions.
A)True
B)False
Q2) A Poisson distribution is:
A) relevant when we sample from a population with only two types of members.
B) relevant when we perform a series of independent,identical experiments with only two possible outcomes.
C) usually relevant when we are interested in the number of events that occur over a given interval of time
D) the cornerstone of statistical theory
E) All of these choices
Q3) We assume that the outcomes of successive trials in a binomial experiment are:
A) probabilistically independent
B) probabilistically dependent
C) identical from trial to trial
D) random number between 0 and 1
Q4) The number of loan defaults per month at a bank is Poisson distributed.
A)True
B)False
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Chapter 6: Decision Making Under Uncertainty
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Sample Questions
Q1) A spider chart shows both the range (as a percentage)of the variability of the input variables as well as the resulting changes in the expected value
A)True B)False
Q2) In decision trees,a decision node (a square)is a time when the result of an uncertain event becomes known.
A)True B)False
Q3) If \(v _ { i }\) is the monetary value corresponding to outcome i and \(p _ { i }\) is its probability,then the expected monetary value is defined as: EMV = \(\sum v _ { i } ^ { 2 } p _ { i }\)
A)True B)False
Q4) Utility function is a function that encodes a person's or company's feelings toward risk.
A)True B)False
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Chapter 7: Sampling and Sampling Distributions
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Sample Questions
Q1) Measurement error occurs when:
A) a portion of the sample does not respond to the survey
B) the sample responses are not clear
C) the responses to question do not reflect what the investigator had in mind
D) the investigator does not correctly tally all responses
Q2) Which of the following statements are correct?
A) A point estimate is an estimate of the range of a population parameter
B) A point estimate is a single value estimate of the value of a population parameter
C) A point estimate is an unbiased estimator if its standard deviation is the same as the actual value of the population standard deviation
D) All of these options
Q3) In stratified sampling with proportional sample sizes,the proportion of each stratum selected differs from stratum to stratum.
A)True
B)False
Q4) Ideally,we prefer estimates that have large standard errors.
A)True
B)False
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Chapter 8: Confidence Interval Estimation
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Sample Questions
Q1) As the sample size increases,the t-distribution becomes more similar to the ________ distribution.
A) normal
B) exponential
C) multinominal
D) chi-square
E) binomial
Q2) When you calculate the sample size for a proportion,you use an estimate for the population proportion;namely \(P _ { \text {est } }\)
)A conservative value for n can be obtained by using \(P _ { \text {est } }\)
=
A) 0.01
B) 0.05
C) 0.10
D) 0.50
E) 1.00
Q3) 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
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Chapter 9: Hypothesis Testing
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Sample Questions
Q1) The null hypothesis usually represents the: A) theory the researcher would like to prove.
B) preconceived ideas of the researcher C) perceptions of the sample population
D) status quo
Q2) The test statistic employed to test \(H _ { 0 } : \sigma _
_ { 2 } ^ { 2 } = 1 \text { is } F = s _ { 1 } ^ { 2 } / s _ { 2 } ^ { 2 }\) ,which is F distributed with \(n _ { 1 } - 1 \text { and } n _ { 2 } - 1\) degrees of freedom.
A)True B)False
Q3) A type I error occurs when the:
A) null hypothesis is incorrectly accepted when it is false B) null hypothesis is incorrectly rejected when it is true C) sample mean differs from the population mean D) test is biased
Q4) The p-value of a test is the smallest level of significance \(a\) at which the null hypothesis can be rejected.
A)True
B)False
Page 11
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Chapter 10: Regression Analysis: Estimating Relationships
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Sample Questions
Q1) The effect of a logarithmic transformation on a variable that is skewed to the right by a few large values is to "squeeze" the values together and make the distribution more symmetric
A)True
B)False
Q2) In regression analysis,the variable we are trying to explain or predict is called the A) independent variable
B) dependent variable
C) regression variable
D) statistical variable
E) residual variable
Q3) A negative relationship between an explanatory variable X and a response variable Y means that as X increases,Y decreases,and vice versa.
A)True
B)False
Q4) The least squares line is the line that minimizes the sum of the residuals. A)True
B)False
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12
Chapter 11: Regression Analysis: Statistical Inference
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Sample Questions
Q1) The ANOVA table splits the total variation into two parts.They are the
A) acceptable and unacceptable variation
B) adequate and inadequate variation
C) resolved and unresolved variation
D) explained and unexplained variation
Q2) If you can determine that the outlier is not really a member of the relevant population,then it is appropriate and probably best to:
A) average it
B) reduce it
C) delete it
D) leave it
Q3) In simple linear regression,if the error variable \(\varepsilon\) is normally distributed,the test statistic for testing \(H _ { 0 } : B _ { 1 } = 0\) is t-distributed with n - 2 degrees of freedom.
A)True
B)False
Q4) The Durbin-Watson statistic can be used to measure of autocorrelation.
A)True
B)False
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Chapter 12: Time Series Analysis and Forecasting
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Sample Questions
Q1) A trend component of a time series is a long-term,relatively smooth pattern or direction exhibited by a series,and its duration is more than one year.
A)True
B)False
Q2) If the observations of a time series increase or decrease regularly through time,we say that the time series has a random (or noise)component.
A)True
B)False
Q3) Which of the following summary measures for forecast errors does not depend on the units of the forecast variable?
A) MAE (mean absolute error)
B) MFE (mean forecast error)
C) RMSE (root mean square error)
D) MAPE (mean absolute percentage error)
Q4) The null hypothesis in a runs test is \(H _ { 0 }\) the data series is random
A)True
B)False
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14
Chapter 13: Introduction to Optimization Modeling
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Sample Questions
Q1) The divisibility property of LP models simply means that we allow only integer levels of the activities.
A)True
B)False
Q2) The equation of the line representing the constraint \(2 x + 4 y \leq 80\)
Passes through the points:
A)
\(( 20,0 ) \text { and } ( 0,40 )\)
B)
\(( 0,20 ) \text { and } ( 40,0 )\)
C)
\(( - 20,0 ) \text { and } ( 0 , - 40 )\)
D)
\(( 0 , - 20 ) \text { and } ( - 40,0 )\)
Q3) In an optimization model,there can only be one:
A) decision variable
B) constraint
C) objective function
D) shadow price
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Chapter 14: Optimization Models
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Sample Questions
Q1) In aggregate planning models,which of the following statements are correct?
A) The number of workers available influences the possible production levels
B) We allow the workforce level to be modified each month through the hiring and firing of workers
C) We eventually allow demand to be backlogged;that is,demand need not be met on time
D) All of these options
Q2) A good shipping plan uses as many cheap routes as possible,but ultimately is constrained by capacities and demands.
A)True
B)False
Q3) If Solver fails to find an optimal solution to an integer programming problem,we might be able to find a near optimal solution by increasing the tolerance setting.
A)True
B)False
Q4) For some types of integer programming problems,their LP relaxation solutions are optimal.
A)True
B)False
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Chapter 15: Introduction to Simulation Modeling
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Sample Questions
Q1) The normal distribution is often used in simulation models because it is the most common distribution in statistics and it does not allow negative values.
A)True
B)False
Q2) The flaw of averages is the reason deterministic models can be very misleading.
A)True
B)False
Q3) It is simple to generate a uniformly distributed random number with a minimum and maximum other than 0 and 1.For example,the formula =150+100 \(\text { * }\)
RAND()generates a number uniformly distributed between
A) 100 and 150
B) 150 and 250
C) 50 and 100
D) 50 and 250
Q4) RISKSIMTABLE is a function in @Risk for running several simulations simultaneously,one for each setting of an input or decision variable.
A)True
B)False
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Chapter 16: Simulation Models
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Sample Questions
Q1) The @RISK function RISKDUNIFORM in the form = RISKDUNIFORM ({List})generates a random member of a given list,so that each member of the list has the same chance of being chosen.
A)True
B)False
Q2) In financial simulation models,the value at risk (VAR)is the 5<sup>th</sup> percentile of an output distribution,and it indicates nearly the worst possible outcome.
A)True
B)False
Q3) 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
Q4) What is the standard deviation of the ending balance? What does the distribution look like now? What should Amanda infer from this?
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18
Chapter 17: Data Mining
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Sample Questions
Q1) Segmentation is also known as clustering,and involves trying to group entities into similar clusters.
A)True
B)False
Q2) Megan is examining the likelihood of people riding the subway.The dependent variable takes on the value of 1 if the individual rides the subway and 0 otherwise.Therefore,she could use logistic regression to examine this question.
A)True
B)False
Q3) If the regression coefficient estimate from a logistic regression is positive,the probability of the dependent variable taking on a value of 1: A) decreases B) approaches zero C) increases D) remains constant
Q4) What does the pivot table indicate about spending habits?
Q5) Clustering is considered a supervised data mining technique. A)True B)False
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Chapter 18: Importing Data Into Excel
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Sample Questions
Q1) Real-world datasets usually do not require any cleansing because they do not contain missing data or typographical errors.
A)True
B)False
Q2) Repetitive tasks are best handled by copying and pasting.
A)True
B)False
Q3) If you had imported the data using 'fixed width,' how would the output have changed?
Q4) Michael needs to create a database that contains a table with information about each car produced,a table with information about the line in which each car was produced,and a table with information about the experience of workers on the line in which each car was produced.Which type of database would allow him to enter this information only once,but also create three separate tables with information on the car,the line,and the workers?
A) Single-table database
B) Flat file database
C) Relational database
D) Web database
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Chapter 19: Analysis of Variance and Experimental Design
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Sample Questions
Q1) The null hypothesis that indicates there are no differences in population means across levels is \(H _ { 0 } : \mu _ { 1 } = \mu _ { 2 } = \mu _ { J }\)
A)True
B)False
Q2) Samples with large within variation have boxplots with:
A) wide boxes and long lines extending from them
B) wide boxes and no lines extending from them
C) short boxes and no lines extending from them
D) short boxes and short lines extending from them
Q3) Mook Corp.has utilized three different types of training for its employees.The company would like to determine whether or not there are differences in the effectiveness (in terms of worker productivity)across the training programs.What is the alternate hypothesis for the ANOVA test in the accompanying figure?
Q4) What does the ANOVA output in the accompanying figure indicate?
Q5) In a full factorial design,researchers assign experimental units to each treatment level combination.
A)True B)False
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Chapter 20: Statistical Process Control
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Sample Questions
Q1) A p chart plots the proportions of items that are conforming.
A)True
B)False
Q2) The \(\bar { X }\) chart charts the averages of small subsamples through time.
A)True
B)False
Q3) 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?
Q4) 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 11 consecutive points above the centerline and three points beyond two standard deviations from the centerline.How should Taveen react?
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