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CMA Foundation · Fundamentals of Business Economics and Management · Decision-making - Types and Process

A manager must choose a product launch strategy where the possible outcomes of each alternative are known and the probabilities of those outcomes cannot be assigned at all. In which decision-making environment is the manager operating?

The manager is operating under uncertainty. In this environment the possible outcomes of each alternative may be identified, but no probabilities can be attached to them. Risk requires known probabilities, and certainty requires known outcomes, so neither fits the situation described.

  1. ACertainty
  2. BRisk
  3. CUncertaintyCorrect
  4. DDeterministic

Explanation

Under uncertainty the decision maker knows the possible outcomes but cannot assign probabilities to them. Under risk, probabilities are known or estimable. Under certainty, the outcome of each alternative is known exactly. So the described situation is uncertainty.

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