A1 with 7 is the most appropriate decision according to criterion of pessimism.

Decision situations in which the chance of occurrence of each state of nature is known or can be estimated are defined as decisions made under risk. Such decision-making problems are also known as probabilistic or stochastic decision problems.

The decision maker is a little optimistic, a little pessimistic and the method that involves both cases is called Criterion of Realism. This method allows the decision maker to use these two approaches together. So, the correct answer is A.

Operations research is an analytical method for the management of organizations that provides mathematical solutions to decision-making problems. There are definitive steps of this approach that make it analytical: 1. Problem definition 2. System analysis for the problem and data gathering 3. Model construction 4. Model solution and testing 5. The decision of implementing the solution. So, the correct answer is D.

The Expected Value (EV) is an anticipated value for a given investment at some point in the future. In decision making at risk, the expected value criterion is commonly used when comparing alternatives, based on maximizing expected profit or minimizing expected loss. The expected value criterion attempts to find the expected profit maximized or the expected cost minimized. The profit or cost that will arise from each alternative is handled by certain possibilities. When the decision’s consequences involve only money, we can calculate the Expected Monetary Value (EMV). The correct answer is B.

In the decision making process under risk, a probability value must be determined for the chance of realization of all states of nature in the strategy table and the sum of all probabilities of states of nature must be equal to 1. After these possibilities are added to the strategy table, the decision maker should determine which approach will be used to select the best course of action. These approaches are Expected Value (EV) (or Expected Monetary Value (EMV)), Expected Opportunity Loss (EOL), and the Maximum Probability which will be explained in the following section.

EMV max : x = 50 (0.4) + 110 (0.6) = 86. pg. 36. Correct answer is E.

The decision node, represented in a square shape on the decision tree is a point from which two or more branches emerge. Each branch from a decision node represents a possible alternative to be chosen by the decision-maker.

When the decision maker does not know
the probabilities of occurrence of events, the
decision-making is called “decision making
under uncertainty”. In this sense, the correct answer is B.

In the minimization models, the objective function is alternatively named cost function. The reason for this is the ultimate goal of minimizing something is to reduce loss or “cost”. In the minimization models, draw a line parallel to the objective function and near to the origin. This line should contain at least one point of the feasible region. Find the coordinates of this point by solving the equations of the drawn line and the boundary line(s) of the feasible region.

As also understood from the information given, the statements about the minimization models in the options II, III, IV and V are correct, so the correct answer is E. The statement in the option I is not correct because of the fact that in the minimization models, the objective function is alternatively named cost function.

Precision is not among the reasons for making decisions difficult or easy.

Payoff: In decision analysis payoff refers to the consequence resulting from a specific combination of a decision alternative and a state of nature. Payoffs can be expressed in terms of profit, cost, time, distance, or any other measure appropriate for the decision problem being analyzed. The correct answer is C.

A linear expression appears below; the powers of its variables x and y are equal to one.

2x – 3y

A linear constraint requires a linear expression to be equal to a number, to be less/greater than or equal to a number.

x + y = 4 

x – 3y ≤ 2 

x ≥ y  . 

The correct answer is B.

In decision making under uncertainty, there is more than one event and these may not be identified or measured. Decision maker has no information and knowledge about outcomes of the events or probability of occurrence of the events. In cases where there is no level of information or knowledge about the outcomes of events, the decision is given under uncertainty.

The steps of the decision making process are: Define decision problem, Establish objectives, List all possible decision alternatives, Identify the pay-off matrix for each combination of alternatives and events, Select the most appropriate decision making method and apply this method, Determine the best alternative and make your decision. The correct answer is "C".

x ≥ y

The last expression stated above is called a non-negativity constraint, which requires the value x to be greater or equal to zero. A linear program either minimizes or maximizes a linear expression subject to defined linear constraints. The correct answer is C.

Some decisions are easy to make while some are more difficult. There might be many reasons. Some of these reasons are: information, uncertainty, scarce source, psychological factors, number of alternatives and cost of making errors. The correct answer is D.

The Equally Likely Method indicates that all events occur equally likely if the probability of occurrence of events is unknown. Therefore, calculation is made considering that the event’s possibility occur equally. The final decision is made according to the objective (maximum or minimum) of the problem.