BSE Bachelor of Science in Engineering Management: Strategic Decision Making 2

Question 1

Which decision-making framework explicitly separates the problem identification phase from the solution generation phase to reduce cognitive bias?

Accepted Answer

Kepner-Tregoe method

Answer

The Kepner-Tregoe method structures decision making into distinct phases—situation appraisal, problem analysis, decision analysis, and potential problem analysis—keeping problem definition separate from solution generation.

Question 2

An engineering manager must choose between two capital projects with identical NPVs. Project A has a payback period of 2 years; Project B has a payback period of 5 years. Under uncertainty, which project is generally preferred and why?

Accepted Answer

Project A, because shorter payback periods reduce exposure to uncertainty

Answer

When NPVs are equal, a shorter payback period reduces the firm's exposure to future uncertainty and risk, making Project A preferable under uncertain conditions.

Question 3

In game theory applied to strategic engineering management decisions, a Nash Equilibrium represents a state where:

Accepted Answer

No player can improve their outcome by unilaterally changing their strategy

Answer

A Nash Equilibrium occurs when each player's strategy is the best response to the strategies of all other players, so no single player benefits by deviating alone.

Question 4

When applying the Analytic Hierarchy Process (AHP) to a vendor selection decision, the consistency ratio (CR) should be:

Accepted Answer

Less than or equal to 0.10 to confirm judgment consistency

Answer

AHP requires a CR ≤ 0.10 (10%) to confirm that pairwise comparisons are sufficiently consistent; higher values indicate the judgments should be revisited.

Question 5

A company uses a decision tree and calculates the Expected Monetary Value (EMV) of launching a new product as $250,000 and not launching as $80,000. What is the Expected Value of Perfect Information (EVPI)?

Accepted Answer

Cannot be determined without probabilities

Answer

EVPI requires knowing the EMV under certainty (best outcome for each state of nature weighted by probabilities), which cannot be calculated from EMV alone without the underlying probability and payoff data.

BSE - Mgt Bachelor of Science in Engineering Management Practice Test

BSE - Mgt Bachelor of Science in Engineering Management Practice Test

BSE Bachelor of Science in Engineering Management: Strategic Decision Making 2