In computing an expected value (EV), the weights are
A) decision alternative probabilities.
B) the payoffs.
C) expected outcomes.
D) the state-of-nature probabilities.

Question

Quizplus · Accepted Answer

In computing an expected value, the weights are the probabilities of each state of nature because they determine the likelihood of a certain outcome. The expected value is then calculated by multiplying each outcome by its corresponding probability and adding up the results. Therefore, the state-of-nature probabilities are the weights used in computing an expected value.

In Computing an Expected Value (EV), the Weights Are