The parameter R in an exponential utility function represents
a. the decision maker's risk tolerance. b. the utility function's error tolerance.
c. the posterior probability. d. the likely profit/loss from the investment.
Q. 2Exponential utility functions indicate that the decision maker is
a. risk monitor.
b. risk averse.
c. risk neutral.
d. risk taker.
Q. 3The utility function for money is a curve that depicts the relationship between
a. decision alternative and utility. b. branch probabilities and utility.
c. regret and utility. d. monetary value and utility.
Q. 4A _____ is a decision maker who would choose a guaranteed payoff over a lottery with a better expected payoff.
a. risk taker b. risk-neutral
c. risk avoider d. risk-creator
Q. 5__________ is a measure of the total worth of a consequence reflecting a decision maker's attitude toward considerations such as profit, loss, and risk.
a. Cost-to-company
b. Utility
c. Decision value
d. Regret
Q. 6Bayes' theorem
a. can be used only for cases where conditional probabilities are unknown.
b. cannot be used to calculate posterior probabilities.
c. enables the use of sample information to revise prior probabilities.
d. is useful for determining optimal decisions without requiring knowledge of probabilities of the states of nature.
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