An expected value for a decision tree is the value you would expect if
A) you calculated how much revenue is needed to break even.
B) your business were sold within 30 days.
C) a particular decision is made a large number of times.
D) you took a poll of what people want.

Question

Quizplus · Accepted Answer

An expected value for a decision tree is the average value that would be obtained if a particular decision is made a large number of times. This is because decision trees are used to model the potential outcomes of a decision based on various choices or events, and the expected value takes into account the probabilities and payoffs of each outcome. Option A is incorrect because break-even analysis calculates the point at which revenues equal costs, but does not provide an expected value. Option B is incorrect because the time frame of selling a business within 30 days is not relevant to decision tree analysis. Option D is incorrect because polling what people want does not provide a quantitative measure of expected value.

An Expected Value for a Decision Tree Is the Value