Which of the Following Statement Is FALSE About the Expected

question 64

Multiple Choice

Which of the following statement is FALSE about the expected value approach to make decisions under risk?

• A)It assumes that the decision maker is rational and will choose the optimum decision with the highest expected value.
• B)It ignores the elements other than monetary profits.
• C)It takes irrational factors into consideration.
• D)It ignores factors such as quality of life or the current monetary status of the decision maker.

---

Definitions:

Profit-Maximizing

A strategy or approach aimed at achieving the highest possible profit from operations, often involving minimizing costs and maximizing revenues.

Negative Externality

A negative externality exists when a product or decision results in a negative effect on a third party not directly involved in the transaction.

Positive Externality

A benefit that affects someone who did not choose to incur that benefit, often associated with public goods or services.

Profit-Maximizing

The process or strategy employed by businesses to determine the price and output level that delivers the maximum possible profit.