Instruction 17-3
The following payoff table shows profits associated with a set of three alternatives under two possible events.
$$\begin{array} { c c c c }
\text { States } & A 1 & A 2 & A B \
\hline 1 & 12 & - 2 & 8 \
2 & 4 & 10 & 5
\end{array}$$ where:
S1 is event 1
A1 is action alternative 1
S2 is event 2
A2 is action alternative 2
A3 is action alternative 3
-Referring to Instruction 17-3,if the probability of S1 is 0.2 and S2 is 0.8,then the expected monetary value of A1 is _______.
A) 2.4
B) 16
C) 8
D) 5.6

Question

Instruction 17-3
The following payoff table shows profits associated with a set of three alternatives under two possible events.
 $$\begin{array} { c c c c } 
\text { States } & A 1 & A 2 & A B \
\hline 1 & 12 & - 2 & 8 \
2 & 4 & 10 & 5
\end{array}$$ where:
S1 is event 1
A1 is action alternative 1
S2 is event 2
A2 is action alternative 2
A3 is action alternative 3
-Referring to Instruction 17-3,if the probability of S1 is 0.2 and S2 is 0.8,then the expected monetary value of A1 is  _______.
A) 2.4
B) 16
C) 8
D) 5.6

Quizplus · Accepted Answer

The expected monetary value (EMV) of A1 is calculated as follows: EMV = (Probability of S1 * Payoff under S1) + (Probability of S2 * Payoff under S2) = (0.2 * 12) + (0.8 * 4) = 2.4 + 3.2 = 5.6.

Instruction 17-3 the Following Payoff Table Shows Profits Associated with a Set

Instruction 17-3
the Following Payoff Table Shows Profits Associated with a Set