Monte Carlo simulation relies on which of the following?

Monte Carlo simulation relies on which of the following?

• A. Random sampling and probability distributions
• B. Fixed deterministic inputs only
• C. Qualitative judgments exclusively
• D. Expert opinion only

Answer: (A)

Monte Carlo simulation is about using random sampling from probability distributions to model uncertainty. By assigning distributions to uncertain inputs and repeatedly drawing random values from those distributions, you generate a wide range of possible outcomes and can quantify risks, probabilities, and expected results. Using fixed deterministic inputs would give only a single outcome without any sense of variability, and relying solely on qualitative judgments or expert opinion cannot provide the numerical probability information needed for probabilistic analysis.

Monte Carlo simulation is about using random sampling from probability distributions to model uncertainty. By assigning distributions to uncertain inputs and repeatedly drawing random values from those distributions, you generate a wide range of possible outcomes and can quantify risks, probabilities, and expected results. Using fixed deterministic inputs would give only a single outcome without any sense of variability, and relying solely on qualitative judgments or expert opinion cannot provide the numerical probability information needed for probabilistic analysis.