Question

After all probabilities and payoffs are placed on a decision tree, the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.
a. true
b. false

Answer 1

The statement is true.

The area of mathematics known as probability deals with numerical representations of the likelihood that an event will occur or that a statement is true. An event's probability is a number between 0 and 1, where, roughly speaking, 0 denotes its impossibility and 1 denotes its certainty.  The higher an event's probability, the more likely it is that it will occur. A straightforward illustration is tossing a fair (impartial) coin. The chance of both outcomes ("heads" and "tails") is equal because the coin is fair, "heads" is more likely than tails.

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