ECONOMICS
DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Probabilities are rarely wrong
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Only costs are considered, not benefits
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A decision-tree uses qualitative rather than quantitative data
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Choices are set out in a logical way
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Detailed explanation-1: -A decision tree is a mathematical model used to help managers make decisions. A decision tree uses estimates and probabilities to calculate likely outcomes. A decision tree helps to decide whether the net gain from a decision is worthwhile.
Detailed explanation-2: -Decision trees provide an effective method of decision making because they: Clearly lay out the problem so that all options can be challenged. Allow us to analyze fully the possible consequences of a decision. Provide a framework to quantify the values of outcomes and the probabilities of achieving them.
Detailed explanation-3: -It helps in processing logic involved in decision-making, and corresponding actions are taken. It is a diagram that shows conditions and their alternative actions within a horizontal tree framework.
Detailed explanation-4: -What is a decision tree? A decision tree is a flowchart that starts with one main idea and then branches out based on the consequences of your decisions. It’s called a “decision tree” because the model typically looks like a tree with branches.