Which option correctly describes the purpose of a decision tree?

• A. A sequence of interrelated decisions and their expected outcomes
• B. A histogram of a data set
• C. The mean of a sample
• D. A pictorial method of showing a sequence of interrelated decisions and their expected outcomes

Answer: (D)

Decision trees are a visual tool used to map decisions and their consequences. The purpose is to present a sequence of interrelated decisions and their expected outcomes in a pictorial, branching diagram, so you can see how choosing one option leads to different possible futures and their payoffs or probabilities. This visual layout lets you calculate expected values at each branch and compare alternatives under uncertainty, guiding you toward the most favorable path. The other options miss this key feature: the first describes the idea of decisions and outcomes but not the diagrammatic, visual format; the histogram and the mean are unrelated concepts for decision analysis.