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GSOE9210 Engineering Decisions sample final exam GSOE9210 Instructions: • Time allowed: 2 hours • Reading time: 10 minutes • This paper has 19 pages • Total number of questions: 53 (multiple choice) • Total marks available: 60 (not all questions are of equal value) • Allowed materials: UNSW approved calculator, pencil (2B), pen, ruler, language dictionary (paper) This exam is closed-book. No books, study notes, or other study ma- terials may be used • Provided materials: generalised multiple choice answer sheet, graph paper (1 page), working out booklet • Answers should be marked in pencil (2B) on the accompanying multiple choice answer sheet • The exam paper may not be retained by the candidate 1 Start of exam Questions 1 to 7 refer to the problem below. Recall the school fund-raiser example from lectures. There are two options for the fund-raising activity: a feˆte (F) or a sports day (S). The money raised by each activity depends on the (unpredictable) weather: on a dry day (d) a feˆte will make a profit of $150 and a sports day only $120; however, on a wet day (w) the sports day will earn $85 and the feˆte only $75. Suppose Alice has no information about the likelihood of whether any given day will be dry or wet. The fund-raiser is a once-off event; i.e., it will only be held once on a particular day. 1. (1 mark) On any given day, which of the two activities (S or F) will ensure the greatest lower bound on profit? a) S only b) F only c) both S and F d) neither S nor F e) a mixture of S and F 2. (1 mark) Suppose Alice is more concerned about limiting the maximum regret—she doesn’t like to miss out on opportunities. Which activity would Alice prefer? a) S only b) F only c) both S and F d) neither S nor F e) a mixture of S and F For the following questions assume the following: Suppose now that Alice works for the local branch of the Government’s ed- ucation department. She is in charge of twelve local schools, and is planning to hold a single-day fund-raiser in each school on the same day. She can hold different activities in different schools, if she wishes. 2 3. (1 mark) In how many schools should Alice hold a sports day if she wants to ensure the greatest minimum profit? a) in none of them b) in four of them c) in six of them d) in eight of them e) in all twelve of them 4. (1 mark) In how many schools should a sports day be hosted if limiting the maximum regret is the main consideration? a) in none of them b) in three of them c) in four of them d) in six of them e) in all twelve of them For the following question, suppose that fund-raising events are held in one day of each week of every month. 5. (1 mark) Let p = P (d) be the probability that any given day is dry. Which is the Bayes action for probability p = 1 2 ? a) S only b) F only c) both S and F d) neither S nor F e) a mixture of S and F Records kept over the last ten years indicate that, on average, the number of dry days per month in Alice’s geographic area are as follows:1 Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dry days 15 13 10 8 6 5 5 7 11 13 14 16 1Note that Alice lives in a very wet area; perhaps a mountain valley. 3 6. (2 marks) Alice holds her fund-raisers every month except the one month in which she takes her annual holidays. If Alice is concerned with limiting the maximum regret, which of the options below would be the best time for Alice to take her holidays? a) Jan or Feb b) Feb or Sep c) June or July d) Apr or Aug e) Jan or Dec 7. (1 mark) If Alice were concerned with securing the greatest minimum profit, in which months should she schedule her holidays? a) Jan or Feb b) Feb or Sep c) June or July d) Apr or Aug e) Jan or Dec Questions 8 to 22 refer to decision table below. Consider the following decision table for a problem in which the outcomes are measured in dollars ($). s1 s2 a1 10 50 a2 40 20 There are two agents, A and B, who are making independent decisions on which of the possible actions (a1 and a2) to take—note that this is not a game: both agents are choosing separate decisions at different times. Consider agent A first. Agent A’s utility function for money is logarithmic (with base 2); i.e., u(x) = log2(x − a), where a ∈ R is a parameter to be determined. 4 8. (1 mark) If u(10) = 0, which alternative below best describes the utility function u(x)? a) log(x) b) log(x− 1) c) log(x + 9) d) log(x− 9) e) none of the above 9. (1 mark) Let p = P (s1). If p = 1 2 , which of the following statements is correct? a) a1 has greater expected dollar value than a2 b) a2 has greater expected dollar value than a1 c) both actions have the same expected dollar value d) a1 is dominated e) none of the above 10. (2 marks) For p = 1 2 , which of the following statements is true? a) A prefers a1 to a2 b) A prefers a2 to a1 c) A is indifferent between the two actions d) A prefers neither action e) none of the above 11. (1 mark) For which value(s) of p would A be indifferent between the two actions? a) p = 0 b) 0 < p 6 1 4 c) 1 4 < p 6 1 2 d) 1 2 < p < 3 4 e) 3 4 6 p 5 12. (1 mark) For p = 1 2 , the certainty equivalent of a1 is closest to . . . a) $0 b) $10 c) $15 d) $25 e) $45 13. (1 mark) For p = 1 2 , the certainty equivalent of a2 is closest to . . . a) $0 b) $10 c) $15 d) $25 e) $45 14. (1 mark) For p = 1 2 , what is the approximate value of the risk premium of a1? a) $0 b) −$10 c) −$6 d) $15 e) $20 15. (1 mark) For p = 1 2 , what is the approximate value of the risk premium of a2? a) $0 b) −$10 c) −$3 d) $3 e) $10 For agent B all we know is that she is indifferent between a certain $20 and 10% chance of $50 and 90% of $10. She is also indifferent between $40 and the lottery [ 6 10 : $50| 4 10 : $10]. Assume in the following questions that p = P (s1) = 1 2 . 6 16. (1 mark) Which of the following statements is true? a) B prefers a1 to a2 b) B prefers a2 to a1 c) B is indifferent between the two actions d) B prefers neither action e) none of the above 17. (2 marks) Assume that utilities for dollar values other than those given can be linearly interpolated. For a utility scale in the range [0, 10], which expression below best represents u(x) for $20 6 x 6 $40? a) x− 10 b) 1 10 x− 1 c) 2 5 x− 10 d) 4− 4x e) 1 4 x− 4 18. (1 mark) The certainty equivalent of a1 is closest to . . . a) $20 b) $25 c) $30 d) $35 e) $40 19. (1 mark) The certainty equivalent of a2 is closest to . . . a) $0 b) $10 c) $15 d) $25 e) $45 7 20. (1 mark) What is the approximate value of the risk premium of a1? a) $0 b) −$10 c) −$6 d) $15 e) $20 21. (1 mark) What is the approximate value of the risk premium of a2? a) $0 b) −$10 c) −$3 d) $3 e) $10 22. (1 mark) For which value of p = P (s1) would B be indifferent between the two actions? a) 1 10 b) 1 5 c) 2 5 d) 3 5 e) 7 10 Questions 23 to 26 refer to the problem below. Two friends agree to “meet at the park”, but subsequently each realises that there are two identical parks (A and B) nearby. Each friend has to decide, independently, to which park to go to meet their friend. The game is modelled by the matrix below. A B A 1, 1 0, 0 B 0, 0 1, 1 11 00 8 23. (1 mark) How many plays survive simplification by elimination of dominated strategies? a) none b) one c) two d) three e) four 24. (1 mark) How many equilibrium points does this game have? a) none b) one c) two d) three e) four 25. (1 mark) How many Pareto optimal plays are there in this game? a) none b) one c) two d) three e) four 26. (1 mark) Suppose Alice believes that the probability of Bob going to park A is p = PB(A). Which value of p would leave Alice indifferent between going to either park? a) p = 0 b) p = 1 4 c) p = 1 3 d) p = 1 2 e) for any p ∈ [0, 1] Questions 27 to 30 refer to problem below. Alice and Bob have agreed to meet for lunch. Alice prefers restaurant A and Bob prefers restaurant B. Unfortunately, they didn’t specify at which 9 restaurant they were to meet. This ‘game’ is modelled by the following game matrix. a b A 2, 1 0, 0 B 0, 0 1, 2 21 00 27. (1 mark) How many plays survive simplification by elimination of dominated strategies? a) none b) one c) two d) three e) four 28. (1 mark) How many equilibrium points does this game have? a) none b) one c) two d) three e) four 29. (1 mark) How many Pareto optimal plays are there in this game? a) none b) one c) two d) three e) four 10 30. (1 mark) Suppose Alice believes that the probability of Bob going to restau- rant A is p = PB(a). Which value of p would leave Alice indifferent between going to either restaurant?