If the Decision Maker Has No Knowledge About the Likelihood

question 9

Multiple Choice

If the decision maker has no knowledge about the likelihood of any of the states of nature occurring,then it can be stated that the decision maker is operating in an environment of:

• A)Certainty.
• B)Uncertainty.
• C)Risk.
• D)Optimism.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits one misses out on when choosing one option over another.

Point B

A specific position or location on a graph or diagram, used often in economic models to denote a particular outcome or situation.

Point A

A specific position or location often referenced in economic models or graphs to illustrate a particular scenario or outcome.

Opportunity Cost

The budgetary repercussion of passing on the subsequent top pick when decisions are taken.