Lesson 3.2.2

3.2.2 Understanding management decision making Quiz: AQA Business, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.2.2, Understanding management decision making: 20 multiple choice questions for the AQA Business (7132), Unit 2: Managers, leadership and decision making, written with Revision Ninja.

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The 20 questions

  1. What is the expected value of a project with a 0.6 chance of a 250,000 payoff and a 0.4 chance of a 0 payoff?

    • 150,000
    • 100,000
    • 250,000
    • 400,000

  2. A project costs 30,000 and has an expected gross return of 55,000. What is the expected net gain?

    • 85,000
    • 25,000
    • 55,000
    • 30,000

  3. A business has a 0.2 probability of earning a 500,000 gain. What is the expected value of this outcome?

    • 20,000
    • 100,000
    • 2,500,000
    • 500,000

  4. In a decision tree, which symbol represents a chance (uncertain outcome) node?

    • A triangle, showing a final payoff
    • A diamond, showing the business's mission
    • A square, showing a decision the manager controls
    • A circle

  5. A manager relies on past experience to decide a price change, without any sales data. This is best described as:

    • Intuition-based decision making
    • Scientific decision making using quantitative data
    • Consultation with stakeholders before deciding
    • Delegated decision making to a junior manager

  6. A business uses 100,000 of cash to buy a van instead of repaying a loan costing 8% interest. What is the opportunity cost of the van?

    • The insurance premium paid on the van each year
    • The 100,000 cost of the van itself
    • The depreciation of the van over its life
    • The interest saving of 8,000 a year forgone by not repaying the loan

  7. A decision in which the probabilities of outcomes are known is best described as one involving:

    • Certainty
    • Uncertainty
    • Ambiguity
    • Risk

  8. A business refuses to sell a profitable product that harms the environment. Which influence is most evident?

    • Resource constraints
    • Ethics
    • Liquidity
    • Competition

  9. Option X costs 40,000 and has a 0.7 chance of a 100,000 payoff (otherwise 0). Option Y costs 20,000 and has a 0.4 chance of a 120,000 payoff (otherwise 0). Which has the higher expected net gain, and what is it?

    • Option Y, with an expected net gain of 48,000
    • Option X, with an expected net gain of 30,000
    • Option Y, with an expected net gain of 28,000
    • Option X, with an expected net gain of 70,000

  10. A decision has three outcomes: 0.2 chance of 300,000, 0.5 chance of 100,000, and 0.3 chance of -50,000. What is the expected value?

    • 95,000
    • 110,000
    • 85,000
    • 150,000

  11. Evaluate: what is the strongest argument for scientific decision making over intuition?

    • Intuition is always less accurate, so data should never be questioned
    • Quantitative analysis makes assumptions explicit and allows the decision to be tested and justified to stakeholders
    • Data removes all uncertainty, so intuition is unnecessary
    • Scientific decisions are faster and cheaper than intuitive decisions in every case

  12. A firm must choose between project A (expected net gain 40,000) and project B (expected net gain 35,000) and chooses A. What is the opportunity cost of choosing A?

    • 75,000, the sum of both projects
    • 40,000, the net gain from project A
    • 35,000, the net gain forgone from project B
    • 5,000, the difference between the two projects

  13. Why might a business reject a project that has a positive expected value?

    • Limited finance or staff means it cannot fund the project alongside its core commitments
    • Projects with positive expected value are always illegal
    • Expected value is only relevant to public sector organisations
    • Projects with positive expected value must always be accepted by law

  14. A project has a 0.75 chance of a 100,000 gain and a 0.25 chance of a 60,000 loss. What is its expected value?

    • 60,000
    • 75,000
    • 40,000
    • 85,000

  15. Which statement about expected value is correct?

    • It ignores outcomes that have a low probability
    • It gives the most likely single outcome of a decision
    • It equals the highest payoff available in any option
    • It is a probability-weighted average of outcomes, so it does not guarantee the result of any single decision

  16. A business considers two markets. Market P has an expected value of 80,000 and market Q has 95,000, but Q needs 60,000 more upfront investment. Which factor should be weighed most carefully?

    • Whether market P will produce a higher share price
    • Whether market Q has a more appealing brand name
    • Whether the business can afford the upfront investment, since resource constraints may limit the choice
    • Whether the expected values are both in round numbers

  17. A decision tree shows an option with a 0.5 chance of 200,000 and 0.5 chance of 40,000. What is its expected value?

    • 120,000
    • 80,000
    • 160,000
    • 240,000

  18. Which decision-making influence is most closely linked to a business's long-term purpose?

    • Liquidity
    • Mission
    • Staff turnover
    • Interest rates

  19. Which of these best describes a risk and reward trade-off in a business decision?

    • A higher potential reward usually comes with a higher risk of loss
    • Rewards are fixed by law regardless of risk
    • Risk and reward are never linked in business decisions
    • A higher potential reward always comes with lower risk

  20. Evaluate: why might a business that relies only on intuition face greater risk than one using data?

    • Intuition always produces more accurate predictions than data
    • Data never helps managers make decisions in practice
    • Intuition is illegal under UK company law
    • Intuition may ignore probabilities and opportunity costs, so decisions may be made without understanding the likely outcomes

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