Edexcel Bus: 3.3.3 Decision Trees in Business

What is a limitation of using decision trees?

• They overlook important factors or interactions between variables

• Assigning probabilities to outcomes is subjective

• They do not account for changing circumstances or new information

• All of the above

In a decision tree, what do branches represent?

• Decision points

• Possible outcomes

• Final outcomes

• None of the above

What is the expected value in a decision tree?

• The calculated value for each outcome

• The probability of occurrence for each outcome

• The sum of all probabilities in the tree

• The highest value in the tree

Which of the following is an example of a decision tree application in business?

• Deciding whether to introduce a new product

• Evaluating loan applications

• Choosing an advertising strategy

• All of the above

What does the expected value represent in a decision tree?

• a) The average outcome or result

• b) The best course of action

• c) The highest probability outcome

• d) The worst case scenario

What is one limitation of using decision trees?

• They provide too much flexibility

• They are too complex to understand

• They may oversimplify decision-making processes

• They are always accurate

What do nodes represent in a decision tree diagram?

• Different possible outcomes

• Final outcomes or decisions

• Decision points or events

• Probabilities

What do branches represent in a decision tree diagram?

• Final outcomes or decisions

• Different possible outcomes

• Decision points or events

• Probabilities

What is an example of a business decision that can be made using a decision tree?

• Deciding whether to expand a product line

• Hiring new employees

• Setting up a new office

• Conducting market research

How can decision trees help in analyzing and evaluating different options in business?

• By providing a random representation of possible outcomes

• By providing a visual representation of possible outcomes and a structured approach to decision-making

• By providing a textual representation of possible outcomes

• By providing a numerical representation of possible outcomes