Management Science Chapter 5 Quiz

Name:_______________________ Date:___________________

IA. Modified True or False. (2 points each)

__________1.Revenue management involves managing the long term demand for a fixed perishable
inventory in order to maximize the revenue of the business.

__________2. Revenue management all began in the hotel industry.

__________3. We can illustrate the fundamentals of revenue management through a linear

programming model.

__________4. Revenue management system can be exorbitant and arduous, but the potential payoffs
may be immeasurable.

__________5. American hotel was the one who originally developed revenue management.

IB. True or False

__________6. In portfolio models, risk is maximized by diversification.

__________7. A portfolio can also consist of publicly tradable securities, like real estate, art and private
investments.

__________8. A mutual fund’s portfolio is structured and maintained to match the investment objectives
in its prospectus.

II. Identification

__________1. It is an application of linear programming used to measure the relative efficiency of

operating units with the same goals and objectives.

__________2. Percentage of an individual operating unit's resources that are available to the composite
operating unit.

__________3. A weighted average of outputs and inputs of all operating units with similar goals.

__________4. A condition that exists when pure strategies are optimal for both players.

__________5. A decision-making situation in which two or more decision makers compete by each
selecting one of several strategies.

__________6. Player randomly selects its strategy based on a probability distribution.

__________7. A strategy where the player seeking to minimize the value of the game selects the strategy
that minimizes the maximum payoff obtainable by the other player.

__________8. A game with two players in which the gain to one player is equal to the loss of the other
player.

__________9. This refers to the process of determining how to allocate investment funds across a
variety of asset classes such as stocks, bonds, mutual funds, real estate and cash.
__________10. Are used to determine the percentage of the investment funds that should be made in
each asset class.

__________11. Helps an individual to decide where and how to invest his hard earned money for
guaranteed returns in the future.

__________12. Is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash
equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds.

__________13. Is a type of financial vehicle made up of a pool of money collected from many investors
to invest in securities such as stocks, bonds, money market instruments and other assets.

__________14. Designed for conservative investors who are strongly averse to risk.

__________15. Designed for investors with a variety of risk tolerances.

III. For items number 1-3.

Company X and Company Y are the only manufacturers of Product XY; they compete against each other
for market share. The payoff table of Company X showing its percentage gain in market share is as
follows:

Company Y

Increase Quantity Discounts Extend

Advertising y1 y2 Warranty y3

Increase 4 3 2
Advertising x1
Company X
Quantity Discounts -1 4 1
x2

Extend Warranty 5 -2 5
x3

1. Compute for the expected gain in market share of Company X. Given: PX1=2/5 ; PX2=1/5 ; PX3=2/5 (3
points)

2. Which strategy or strategies would Company X choose?

3. Which strategy of Company X will Company Y probably have the biggest loss?

4. The goal of DEA is to

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IV. Enumeration.

1-6. What are the six steps in formulating linear programming model for other types of DEA application?