Lesson 3.3.3

3.3.3 Decision trees Quiz: Pearson Edexcel Business, Unit 3

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.3.3, Decision trees: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 3: Business decisions and strategy, written with Revision Ninja.

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The 20 questions

  1. What does a decision tree diagram outline for a business?

    • Choices and outcomes
    • Cash flow timing
    • Critical path tasks
    • Market share trends

  2. What does a square node represent in a decision tree?

    • An expected value
    • A final outcome
    • A chance event
    • A decision point

  3. How is Expected Monetary Value (EMV) calculated for an outcome in a decision tree?

    • Payoff times probability
    • Profit divided turnover
    • Revenue minus costs
    • Payoff plus probability

  4. What is a major limitation of using decision trees for strategic planning?

    • Subjective probability estimates
    • Ignoring capital costs
    • Complex accounting maths
    • Fixed project timelines

  5. Which type of factor is a decision tree least able to include?

    • Expected probabilities
    • Financial costs
    • Initial investment costs
    • Qualitative factors

  6. In which direction is a decision tree analysed when calculating expected values?

    • Right to left
    • Left to right
    • Bottom to top
    • Top to bottom

  7. What must the sum of probabilities on all branches from a single chance node equal?

    • 2
    • 1
    • 100
    • 0.5

  8. Which set of probabilities on the branches of one chance node is valid?

    • 0.4 and 0.8
    • 0.2 and 0.3
    • 0.5 and 0.6
    • 0.3 and 0.7

  9. A chance node has a 60% chance of a 200,000 pound payoff and a 40% chance of a loss of 50,000 pounds. What is the EMV?

    • 140,000 pounds
    • 100,000 pounds
    • 80,000 pounds
    • 120,000 pounds

  10. A chance node has a 30% chance of 80,000 pounds and a 70% chance of 20,000 pounds. What is the EMV?

    • 100,000 pounds
    • 38,000 pounds
    • 50,000 pounds
    • 24,000 pounds

  11. Option A has an EMV of £60,000 and Option B has £75,000. Which option should be chosen?

    • Neither option
    • Both options
    • Option A
    • Option B

  12. A product launch has an expected value of 150,000 pounds and costs 90,000 pounds to launch. What is the expected net benefit?

    • 150,000 pounds
    • 60,000 pounds
    • 240,000 pounds
    • 90,000 pounds

  13. Success has a probability of 0.4 with a payoff of 250,000 pounds. Failure has a probability of 0.6 with a loss of 100,000 pounds. What is the EMV?

    • 40,000 pounds
    • -40,000 pounds
    • 150,000 pounds
    • 100,000 pounds

  14. A choice has a 50% chance of 10,000 pounds and a 50% chance of 2,000 pounds. What is its EMV?

    • 6,000 pounds
    • 10,000 pounds
    • 12,000 pounds
    • 2,000 pounds

  15. An option has three outcomes: 0.2 chance of 300,000 pounds, 0.5 chance of 100,000 pounds and 0.3 chance of -40,000 pounds. What is the EMV?

    • 320,000 pounds
    • 140,000 pounds
    • 60,000 pounds
    • 98,000 pounds

  16. Why might a risk-averse manager reject a project with a higher expected monetary value?

    • High brand value
    • High financial risk
    • Low initial cost
    • Certain profit

  17. What is a key limitation of the probability estimates used in decision trees?

    • Completely risk-free
    • Highly subjective
    • Always 100% accurate
    • Legally binding

  18. Which non-financial factor could cause a manager to reject a project with a positive EMV?

    • High net return
    • Increased profit margin
    • Low interest rates
    • Negative brand image

  19. A firm chooses Option B over Option A despite Option A having a higher EMV. Why?

    • Lower risk exposure
    • Higher initial cost
    • Longer completion time
    • Lower total sales

  20. Why are decision trees considered an aid to decision-making rather than a definitive answer?

    • Guarantees business success
    • Eliminates all risk
    • Ignores qualitative factors
    • Calculates exact profits

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