Heading: Analyzing Risky Decisions

question 64

Multiple Choice

Heading: Analyzing Risky Decisions
**Reference: Use the decision tree along with the given probabilities to answer the next six questions
Probability Event A = 30% Probability Event B = 70%
Probability Event 1 = 58% Probability Event 2 = 42%
Probability of Event A given that Event 1 occurs = 16%
Probability of Event B given that Event 1 occurs = 84%
Probability of Event A given that Event 2 occurs = 50%
Probability of Event B given that Event 2 occurs = 50%

-A decision tree is:

• A)a diagram that describes the options available to a decision marker as well as the certain events that can occur at each point in time.
• B)a diagram that helps the observer calculate the expected value, variance and standard deviation of a probability distribution.
• C)not applicable to making decisions under conditions of uncertainty.
• D)a diagram that describes the options available to a decision marker as well as the risky events that can occur at each point in time.

---

Definitions:

Test Statistic

An outcome obtained from samples in a hypothesis experiment, crucial in deciding if the null hypothesis should be dismissed.

P-value

Assuming the correctness of the null hypothesis, it is the possibility of obtaining test results that are equally or more extreme than those observed.

Sample Standard Deviation

A measure of the amount of variation or dispersion of a set of values in a sample.

Null Hypothesis

A default hypothesis that there is no statistical significance in a set of given observations, aiming to be either rejected or not rejected based on test results.