# Midterm exam | Business & Finance homework help

1. A scatter diagram is useful to determine if a relationship exists between two variables. (Points : 2)

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True

False

Question 2.2. Consider the following gasoline data:

Quarter 1, Year 1, Year 2

1, 150, 156

2, 140, 148

3, 185, 201

4, 160, 174

Referring to the information above, what is the seasonal index for third quarter? (Points : 2)

1.017

1.175

.985

.977

Question 3.3. If two events are mutually exclusive, the probability of both events occurring is simply the sum of the individual probabilities. (Points : 2)

True

False

Question 4.4. Determining the average payoff for each alternative and choosing the one with the best payoff is the approach called: (Points : 2)

maximax

maximin

Laplace

minimax regret

expected monetary value

Question 5.5. Enrollment in a particular class for the last four semesters has been 122, 128, 100, and 155 (listed from oldest to most recent). The best forecast of enrollment next semester, based on a three-semester moving average, would be: (Points : 2)

116.7

126.3

168.3

135.0

127.7

Question 6.6. Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14, 12, 13, 15 (listed from oldest to most recent). Forecast sales for the next day using a two-day weighted moving average where the weights are 3 and 1 are: (Points : 2)

14.5

13.5

14

12.25

12.75

Question 7.7. The probability, P, of any event or state of nature occurring is greater than or equal to 0 and less than or equal to 1. (Points : 2)

True

False

Question 8.8. In a scatter diagram, the dependent variable is typically plotted on the horizontal axis. (Points : 2)

True

False

Question 9.9. Which of the following represents the underlying linear model for hypothesis testing? (Points : 2)

Y = b0 + b1 X + ε

Y = b0 + b1 X

Y = β0 + β1 X + ε

Y = β0 + β1 X

None of the above

Question 10.10. An urn contains seven blue and three yellow chips. If the drawing of chips is done with replacement, what is the probability of drawing three yellow chips? (Points : 2)

0.013

0.210

0.333

0.027

Question 11.11. The economic order quantity (EOQ) formula assumes that all input data are known with certainty. (Points : 2)

True

False

Question 12.12. Suppose that you believe that a cubic relationship exists between the independent variable X (of time) and the dependent variable Y. Which of the following would represent a valid linear regression model? (Points : 2)

Y = b0 + b1 X, where X = time3

Y = b0 + b1 X3, where X = time

Y = b0 + 3b1 X, where X = time3

Y = b0 + 3b1 X, where X = time

Y = b0 + b1 X, where X = time1/3

Question 13.13. Which of the following statements provides the best guidance for model building? (Points : 2)

If the value of r2 increases as more variables are added to the model, the variables should remain in the model, regardless of the magnitude of increase.

If the value of the adjusted r2 increases as more variables are added to the model, the variables should remain in the model.

If the value of r2 increases as more variables are added to the model, the variables should not remain in the model, regardless of the magnitude of the increase.

If the value of the adjusted r2 increases as more variables are added to the model, the variables should not remain in the model.

None of the statements provide accurate guidance.

Question 14.14. Error is the difference in the actual value and the predicted value. (Points : 2)

True

False

Question 15.15. Bob White is conducting research on monthly expenses for medical care, including over-the-counter medicine. His dependent variable is monthly expenses for medical care while his independent variable is number of family members. Below is his Excel output.

Click here to view an Excel version of this output

Midterm Essay #3

Referring to the information above, based on his model, each additional family member increases the predicted costs by how much? (Points : 2)

\$110.47

\$16.83

\$93.64

\$127.30

Question 16.16. A measurable quantity that may vary, or is subject to change, and can be controlled is known as a(n) __________. (Points : 2)

decision variable

algorithm

parameter

solution

none of the above.

Question 17.17. What is the correct equation for computing the expected value of perfect information (EVPI)? (Points : 2)

EVPI = expected value under risk for best alternative – expected value under certainty.

EVPI = expected value under certainty – expected value under risk for best alternative.

EVPI = expected value with sample information – expected value without sample information.

EVPI = expected value without sample information – expected value with sample information.

None of the above

Question 18.18. A probability is a numerical statement about the chance that an event will occur. (Points : 2)

True

False

Question 19.19. Assume that you have tried three different forecasting models. For the first, the MAD = 2.5, for the second, the MSE = 10.5, and for the third, the MAPE = 2.7. We can then say: (Points : 2)

the third method is the best.

the second method is the best.

methods one and three are preferable to method two.

method two is least preferred.

None of the above

Question 20.20. The expected value of a probability distribution is: (Points : 2)

the measure of the spread of the distribution.

the variance of the distribution.

the average value of the distribution.

the probability density function.

the range of continuous values from point A to point B, inclusive.

Question 21.21. Saying that a set of events is mutually exclusive and collectively exhaustive implies that one and only one of the events can occur on any trial. (Points : 2)

True

False

Question 22.22. The equation P(A|B) = P(AB)/P(B) is: (Points : 2)

the marginal probability.

the formula for a conditional probability.

the formula for a joint probability.

only relevant when events A and B are collectively exhaustive.

none of the above

Question 23.23. An urn contains seven blue and three yellow chips. If the drawing of chips is done with replacement, what is the probability of drawing a blue chip on the first draw and a yellow chip on the second draw? (Points : 2)

0.027

0.210

0.300

0.700

Question 24.24. Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3.

S1 S2 S3

A \$60 \$145 \$120

B \$75 \$125 \$110

C \$95 \$85 \$130

Refer to the payoff table. What is the expected value under certainty? Assume P(S1) = 0.5 and P(S2) = 0.25. (Points : 2)

\$101.25

\$103.33

\$108.33

\$116.25

\$136.25

Question 25.25. A controllable variable is also called: (Points : 2)

a parameter.

a decision variable.

a mathematical model.

a measurable quantity.

none of the above.

Question 26.26. The number of cell phone minutes used by high school seniors follows a normal distribution with a mean of 500 and a standard deviation of 50. What is the probability that a student uses fewer than 400 minutes? (Points : 2)

0

0.023

0.159

0.977

None of the above

Question 27.27. The classical method of determining probability is: (Points : 2)

subjective probability.

marginal probability.

objective probability.

joint probability.

conditional probability.

Question 28.28. Summing the error values in a regression model is misleading because negative errors cancel out positive errors. (Points : 2)

True

False

Question 29.29. Determining the worst payoff for each alternative and choosing the alternative with the “best of the worst” is the approach called: (Points : 2)

maximax

maximin

Laplace

minimax regret

expected monetary value

Question 30.30. Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3.

S1 S2 S3

A \$60 \$145 \$120

B \$75 \$125 \$110

C \$95 \$85 \$130

Refer to the payoff table. Using the maximax criterion, what would be the highest expected payoff? (Points : 2)

\$145

\$124

\$120

\$110

\$100

Question 31.31. An urn contains seven blue and three yellow chips. If the drawing of chips is done with replacement, what is the probability of drawing a yellow chip on the second draw given that a blue chip was drawn on the first draw. (Points : 2)

0.027

0.210

0.300

0.700

Question 32.32. Consider the following gasoline data:

Quarter 1, Year 1, Year 2

1, 150, 156

2, 140, 148

3, 185, 201

4, 160, 174

Referring to the information above, suppose we expect year 3 to have annual demand of 800. What is the forecast value for the first quarter in year 3? (Points : 2)

180.85

170.36

172.00

186.00

Question 33.33. Assume that you have an urn containing 10 balls of the following description:

4 are white (W) and lettered (L)

2 are white (W) and numbered (N)

3 are yellow (Y) and lettered (L)

1 is yellow (Y) and numbered (N)

If you draw a lettered ball (L), the probability that this ball is white (W) is 0.571. (Points : 2)

True

False

Question 34.34. The fewer the periods over which one takes a moving average, the more accurately the resulting forecast mirrors the actual data of the most recent time periods. (Points : 2)

True

False

Question 35.35. Bob White is conducting research on monthly expenses for medical care, including over-the-counter medicine. His dependent variable is monthly expenses for medical care while his independent variable is number of family members. Below is his Excel output.

Click here to view an Excel version of this output

Midterm Essay #3

Based on the information above, the null hypothesis that the slope is zero can be rejected. (Points : 2)

True

False

Question 36.36. Which of the following is not classified as a qualitative forecasting model? (Points : 2)

Exponential smoothing

Delphi method

Jury of executive opinion

Sales force composite

Consumer market survey

Question 37.37. If the sale of ice cream and pizza are independent, then as ice cream sales decrease by 60 percent during the winter months, pizza sales will: (Points : 2)

increase by 60 percent.

increase by 40 percent.

decrease by 60 percent.

decrease by 40 percent.

be unrelated.

Question 38.38. Given three statistically independent events (A,B,C), the joint probability of P(ABC) = P(A) × P(B) × P(C). (Points : 2)

True

False

Question 39.39. Consider the following gasoline data:

Quarter 1, Year 1, Year 2

1, 150, 156

2, 140, 148

3, 185, 201

4, 160, 174

Referring to the information above, suppose we expect year 3 to have annual demand of 800. What is the forecast value for the second quarter in year 3? (Points : 2)

186.00

175.34

182.64

175.00

Question 40.40. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in \$000’s) based on the different scenarios faced by the manager.

Alternative Bid Accepted Bid Rejected

Buy 1 machine \$10 \$5

Buy 2 machines \$30 \$4

Buy 3 machines \$40 \$2

Refer to the information above. Assume that based on historical bids with the defense contractor, the plant manager believes that there is a 65% chance that the bid will be accepted and a 35% chance that the bid will be rejected.

What is the expected value under certainty? (Points : 2)

1.05

1.95

17.25

27.75

Question 41.41. Bob White is conducting research on monthly expenses for medical care, including over-the-counter medicine. His dependent variable is monthly expenses for medical care while his independent variable is number of family members. Below is his Excel output.

Click here to view an Excel version of this output

Midterm Essay #3

Referring to the information above, what percent of the variation in medical expenses is explained by the size of the family? (Points : 2)

48.3%

49.6%

50.6%

51.3%

Question 42.42. Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3.

S1 S2 S3

A \$60 \$145 \$120

B \$75 \$125 \$110

C \$95 \$85 \$130

Refer to the payoff table. Using the expected monetary value (EMV) criterion, what is the highest attainable expected profit? Assume P(S1) = 0.5 and P(S2) = 0.25. (Points : 2)

\$101.25

\$103.33

\$108.33

\$125

\$145

Question 43.43. The maximin criterion is an optimistic approach to decision making. (Points : 2)

True

False

Question 44.44. Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3.

S1 S2 S3

A \$60 \$145 \$120

B \$75 \$125 \$110

C \$95 \$85 \$130

Refer to the payoff table. What is the expected value of perfect information (EVPI)? Assume P(S1) = 0.5 and P(S2) = 0.25. (Points : 2)

\$0

\$11.25

\$15

\$20

\$35

Question 45.45. Consider the following gasoline data:

Quarter 1, Year 1, Year 2

1, 150, 156

2, 140, 148

3, 185, 201

4, 160, 174

Referring to the information above, what is the seasonal index for fourth quarter? (Points : 2)

1.017

1.175

.977

.899

Question 46.46. Bob White is conducting research on monthly expenses for medical care, including over-the-counter medicine. His dependent variable is monthly expenses for medical care while his independent variable is number of family members. Below is his Excel output.

Click here to view an Excel version of this output

Midterm Essay #3

Referring to the information above, the significance F-test, is this model a good prediction equation? (Points : 2)

Yes

No

Question 47.47. A bakery buys sugar in 15-pound bags. The bakery uses 5000 bags of sugar each year. Carrying costs are \$20 per bag per year. Ordering costs are estimated at \$5 per order. Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags. It takes 5 days for each order of sugar to be filled. What is the Reorder point (ROP)? (Points : 2)

20

100

5

500

15

Question 48.48. Model variables can be controllable or uncontrollable. (Points : 2)

True

False

Question 49.49. The number of cars passing through an intersection in the next five minutes can usually be described by the: (Points : 2)

normal distribution.

uniform distribution.

exponential distribution.

Poisson distribution.

None of the above

Question 50.50. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in \$000’s) based on the different scenarios faced by the manager.

Alternative Bid Accepted Bid Rejected

Buy 1 machine \$10 \$5

Buy 2 machines \$30 \$4

Buy 3 machines \$40 \$2

Using the information above, which alternative should be chosen based on the maximin criterion? (Points : 2)

Buy 1 machine

Buy 2 machines

Buy 3 machines