A Rational Decision Maker Must Choose Between Two Alternatives

question 80

Multiple Choice

A rational decision maker must choose between two alternatives.Alternative 1 has a higher EMV than Alternative 2,but the decision maker chooses Alternative 2.What might explain why this occurs?

• A)Alternative 2 may have a higher expected utility.
• B)Alternative 1 may have a lower expected opportunity loss.
• C)The probabilities are not known.
• D)A rational decision maker could not possibly choose alternative 2.
• E)None of the above

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Definitions:

External Failure Cost

Expenses incurred when a product fails to meet quality standards after being delivered to the customer, including returns, repairs, and lost sales.

Quality Cost Report

Internal report that details the costs associated with preventing, detecting, and correcting defective work, categorized into prevention, appraisal, and failure costs.

Internal Failure Cost

Costs incurred to rectify defects found before the delivery of a product to the customer, including rework, scrapping, and downtime.

Quality Cost Report

A document that outlines the expenses associated with preventing, detecting, and correcting defective work, providing insights into the cost of quality.