CIMA BA2 · Chapter 9 · Question 4 of 11
Which of the following is a limitation of using EXPECTED VALUES to make decisions?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The expected value is a long-run average and may not be a possible outcome of a one-off decision
Explanation
An expected value is the average result if a decision were repeated many times. For a one-off decision the actual outcome will be one of the individual outcomes, not the average. Expected values also ignore the decision maker's attitude to risk and the spread of outcomes, and they depend on the accuracy of the probabilities.
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