1. The basic decision making environment are
a.certainty and risk
b.risk and uncertainty
c.certainty, uncertainty and risk
d.certainty, uncertainty and risk
Based on the given problem, the correct answer is option C: certainty, uncertainty, and risk.
To explain the correct answer, let's break down the meanings of certainty, uncertainty, and risk in the
context of decision making:
1. Certainty: This refers to a situation where the decision maker has complete knowledge and
information about the future outcomes and consequences of their decisions. In such a case, there is
no ambiguity or doubt, and the outcome is known with complete certainty.
2. Uncertainty: This refers to a situation where the decision maker lacks complete knowledge or
information about the future outcomes and consequences of their decisions. In uncertain
environments, there may be multiple possible outcomes, and the probabilities associated with each
outcome might be unknown.
3. Risk: This refers to a situation where the decision maker has some knowledge or information
about the probabilities or likelihoods of different outcomes. In risky environments, the decision
maker can assess the probability of different outcomes, which allows them to make informed
decisions based on the expected value or utility of each option.
Therefore, the correct answer includes all three elements - certainty, uncertainty, and risk - as they
represent different decision-making environments that a decision maker may encounter.
Now, let's explain the incorrect options:
- Option A: Certainty and risk only: This option does not consider uncertainty, which implies that the
decision maker has complete knowledge about the probabilities of different outcomes. This is not
always the case in decision making.
