Answer (B) is correct . Applying decision theory requires the decision maker to develop an exhaustive list of possible future events. All possible future events that might occur must be included, even though the decision maker will likely be very unsure as to which specific events will occur. These future uncontrollable events are referred to as states of nature.
Answer (A) is incorrect because Payoffs are outcome measures such as profit or loss.
Answer (C) is incorrect because Probabilities are the likelihood of occurrence of the states of nature.
Answer (D) is incorrect because Nodes (junction points) are decision points.
|
