# Decision Theory MCQ

1. A type of decision-making environment is

(a) certainty

(b) uncertainty

(c) risk

(d) all of these

Answer: Option (d)

1. Which of the following criterion is not used for decision-making under uncertainty?

(a) maximin

(b) maximax

(c) minimax

(d) minimize expected loss

Answer: Option (d)

1. Decision theory is concerned with

(a) methods of arriving at an optimal decision

(b) selecting optimal decision in a sequential manner

(c) analysis of information that is available

(d) all of these

Answer: Option (d)

1. Which of the following criterion is not applicable to decision-making under risk?

(a) maximize expected return

(b) maximize return

(c) minimize expect regret

(d) knowledge of likelihood occurrence of each state of nature

Answer: Option (b)

1. The minimum expected opportunity loss (EOL) is

(a) equal to EVPI

(b) minimum regret

(c) equal to EMV

(d) both (a) and (b)

Answer: Option (d)

1. The expected value of perfect information (EVPI) is

(a) equal to expected regret of the optimal decision under risk

(b) the utility of additional information

(c) maximum expected opportunity loss

(d) none of the above

Answer: Option (a)

1. The value of the coefficient of optimism (a) is needed while using the criterion of

(a) equally likely

(b) maximin

(c) realism

(d) minimax

Answer: Option (c)

1. The decision-maker’s knowledge and experience may influence the decision-making process wi.en using the criterion of

(a) maximax

(b) maximax regret

(c) realism

(d) maximin

Answer: Option (c)

1. The difference between the expected profit under conditions of risk and the expected profit with perfect information is called

(a) the expected value of perfect information

(b) expected marginal loss

(c) none of the above

(d) none of the above

Answer: Option (a)

1. The concept of utility is used to

(a) measure the utility of money

(b)  take into account aversion of risk

(c) both (a) and (b)

(d) none of these

Answer: Option (c)