Decision trees are made up of three primary elements: Uncertainties, Decisions, and Results.  For each decision tree elements please indicate the shape that represents that element and a description of how that element is used in creating values for each option.

What will be an ideal response?


Uncertainties are represented by circles
• Multiply each outcome by its probability
• Insert this value in the decision tree
• Repeat this for each uncertainty

Decisions are represented by squares
• Estimate the costs associated with each option
• Subtract cost of the outcome value you calculated to find the benefit of that decision
• Repeat this for each decision

Results are represented by a line
• When you have calculated all of the decision benefits (value-cost), choose the option that has the largest benefit. This is the optimal decision.

Business

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What will be an ideal response?

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What will be an ideal response?

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