Question

TABLE 19-6
A student wanted to find out the optimal strategy to study for a Business Statistics exam. He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam. From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy.
 
-Which of the following is not a decision making criterion?
A) Maximizing the expected monetary value of an action
B) Minimizing the expected opportunity loss of an action
C) Minimizing expected profit under certainty
D) Maximizing the return-to-risk ratio

Accepted Answer

Minimizing expected profit under certainty is not a decision-making criterion. It implies that there is no probability or uncertainty associated with the decision, making the decision-making process unnecessary. Maximizing the expected monetary value of an action, minimizing the expected opportunity loss of an action, and maximizing the return-to-risk ratio are all valid decision-making criteria.

Quiz 19: Questions that Involve Online Topics