When Making a Decision Under a Condition of Risk

question 53

Multiple Choice

When making a decision under a condition of risk:

• A) the decision maker is relatively more likely to make errors.
• B) the decision maker clearly knows the consequences of alternatives.
• C) the decision maker needs to put in the least amount of time and resources.
• D) the decision maker relies exclusively on information and not on experience or intuition.
• E) the decision maker clearly knows the payoffs associated with the alternatives.

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Definitions:

Utility Schedule

A table showing the different levels of satisfaction (utility) a consumer gets from consuming varying quantities of a good or service.

Utility Schedule

A representation that shows various quantities of a commodity or service and the utility or satisfaction derived from each.

Marginal Utility

The augmented satisfaction or value derived from the consumption of one extra unit of a product or service.

Total Utility

Measures the total satisfaction or benefit that a person derives from consuming a certain quantity of a good or service.