Which of the following best describes how decisions are made under certainty in microeconomics?

• A. Decisions are based solely on normative judgments about what ought to happen.
• B. Decision-makers rely on probability distributions to evaluate uncertain outcomes.
• C. Decision-makers use expected utility to choose among risky alternatives.
• D. Decision-makers have complete information about all possible outcomes and their consequences.

Answer: (D)

Verified step by step guidance

1. Understand the concept of decision-making under certainty: it means that the decision-maker knows all possible outcomes and the consequences of each choice with complete information.
2. Recognize that under certainty, there is no ambiguity or risk involved because the outcomes are known and predictable.
3. Contrast this with decision-making under uncertainty or risk, where probabilities or expected utilities are used to evaluate outcomes.
4. Identify that normative judgments or subjective preferences are not the primary basis for decisions under certainty; instead, decisions are made based on factual, known information.
5. Conclude that the best description of decision-making under certainty is that decision-makers have complete information about all possible outcomes and their consequences.