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 0.5,then the expected monetary value (EMV)for A1 is ________.
A) 4
B) 8
C) 6.5
D) 3

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 0.5,then the expected monetary value (EMV)for A1 is ________.
A) 4
B) 8
C) 6.5
D) 3

Quizplus · Accepted Answer

To calculate the EMV, we need to multiply the probability of each event by the expected value of each action and then add them up. So, for A1:

EMV of A1 = (0.5 x 6) + (0.5 x 2) = 4

For A2:

EMV of A2 = (0.5 x 3) + (0.5 x 8) = 5.5

For A3:

EMV of A3 = (0.5 x 2) + (0.5 x 6) = 4

Therefore, the best choice is A2 with an EMV of 5.5, as it has the highest expected value.

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