probability assessment

18.

Which of these statements is not true? Assessments of the probabilities of very rare events can be problematic because:

A) The availability heuristic can lead to overestimates of probabilities

B) Large differences between very small probabilities are difficult to discern

C) The relative frequency approach to probability assessment is unlikely to be useful

D) They often result from the conjunction of many other events and probabilities for conjunctive events tend to be underestimated

19.

Fault trees and event trees are useful for assessing the probabilities of rare events because:

A) They ensure that all possible causes of rare events are taken into account

B) They assume that the probabilities of the events which cause the rare event are independent

C) They break the estimation task down into smaller and easier tasks

D) They do not allow subjective probabilities to be used in the assessment task

20.

According to research, a decision maker is more likely to regard probabilities as being credible if they are:

A) At the extreme ends of the 0 to 1.0 probability scale

B) Towards the middle of the 0 to 1.0 probability scale

C) Not expressed as frequencies

D) Well calibrated

14.

At the start of each day a manager makes an estimate of the probability that demand for a product will exceed the amount that the company has in stock. If he is perfectly calibrated, on the 200 days when he estimates a 0.3 probability, demand will exceed the stock level on:

A) None of the days

B) 30 days

C) 60 days

D) All of the days

11.

Probability wheels are most widely used as:

A) An aid for eliciting probabilities for very rare events

B) An aid for indirect probability assessment

C) A device for measuring the calibration of probability estimates

D) A device for measuring a decision maker’s attitude to risk

10.

According to some research, people are less likely to suffer from the conjunction fallacy if:

A) They are students rather than practicing managers

B) Their judgments are not subject to time pressures

C) They are expert forecasters

D) They are asked to think in terms of frequencies, rather than probabilities

8.

A plastic water tank which is being constructed for a single customer must pass through seven production stages. At each stage there is an independent 80% probability that the product will not develop a fault. A manager is likely to overestimate the probability that a product will be fault-free at the end of the process because:

A) He is using the anchoring and adjustment heuristic

B) He is using the availability heuristic

C) He is using the representativeness heuristic

D) He is making a biased assessment of co-variation

9.

A manager is asked to estimate the most likely level of next month’s sales. She is then asked to make (i) a pessimistic estimate, and (ii) an optimistic estimate, such that there is a 99% probability that the actual sales will fall in the interval between the pessimistic and optimistic estimates. According to research, this interval is most likely to be:

A) About the right width

B) Too wide

C) Too narrow

D) Too narrow to include the most likely estimate

6.

When presented with the following two scenarios, managers wrongly judged that Scenario X was more probable than Scenario Y.

Scenario X: Total consumer spending in the USA on electrical goods will increase by 20% over the next ten years because people will replace their current products with more energy efficient versions.

Scenario Y: Total consumer spending in the USA on electrical goods will increase by 20% over the next ten years.

This is an example of:

A) Ignoring regression to the mean

B) Expecting chance to be self-correcting

C) Illusory correlation

D) The conjunction fallacy

4.

A six-sided dice is about to be tossed six times. According to the representativeness heuristic which of the following would be judged to be the most probable sequence of outcomes (O = odd number, E = even number)?

A) O-O-O-E-E-E

B) O-E-O-E-O-E

C) O-E-E-O-E-O

D) All sequences would be judged to be equally probable

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