1. Expected monetary value is most appropriate: a. When probabilities of each st

Question

1. Expected monetary value is most appropriate:

a. When probabilities of each state of nature are known

b. When probabilities are the same

c. When both revenue and cost are known

d. When the probability of each decision alternative is not known

e. None of the above

2. True or False? ON the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which “total costs are equal for two alternative locations..."

Explanation / Answer

1. a. When probabilities of each state of nature are known

Expected Monetary Value = SUMPRODUCT of probabilities of states of nature and payoff under states of nature.

2. True

At crossover chart, the point where two cost curves cross is called the point of indifference, because the total cost of alternative locations is same at this point.

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