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

Mehta Foods' production head selects one of two available machines after comparing their costs and output, with the objective of a single, clearly defined goal: minimising cost per unit. The choice is between known alternatives with known outcomes. This is a decision taken under conditions of:

It is a decision under certainty, because the alternatives are known and their outcomes, cost and output, can be predicted with confidence. Under risk or uncertainty, outcomes depend on probabilities or unknown future events, which is not present in this machine selection.

  1. AUncertainty
  2. BRisk with unknown probabilities
  3. CCertaintyCorrect
  4. DConflict

Explanation

When alternatives and their outcomes are known with confidence, the decision is made under certainty. Uncertainty and risk involve unknown outcomes or probabilities, which is not the case here.

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