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Q. Which two of the following statements about expected values are true?
1) EV is of limited use for decisions regarding outcomes which will be repeated often
2) Using EV in decision-making can lead to the worst possible outcome being ignored
3) The reliability of EV calculations is heavily influenced by the accuracy of the probabilities assigned to outcomes.
4) Expected values take account of the risk associated with a decisionAnswer is 3 and 4.
My question is why false no.2? Confuse to choose 3 & 4 as well.
Thanks Teacher Moffat.May.
2 is not true because all outcomes are part of the calculation.
3 is true because if the probabilities are wrong then the EV will be different.
If you have typed the question correctly then the answer is wrong because 4 is not true – EV’s do not take account of the risk.
Teacher Moffat,
How about number 1 because there should be two correct answer?Thanks.
May
Number 1 is wrong because it is useful when outcomes are repeated often (it is not as useful when outcomes are not repeated.
Sir John Moffat,
With due respect, can you please reconfirm the statement 2?
I think the statement itself is true.
As EV focuses on the average outcome across all possible outcome, but potentially overlooking extreme, low-probability events that could have significant negative consequences, even if they are unlikely to occur, hence the worst possible outcome may being ignored.
Please correct me, if I am wrong.
Thankyou!
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