Use the following to answer the questions below.
In choosing between three new jobs,Joe MBA considers the potential payoffs over the next three years.The following table contains the payoffs,given the speed of promotion in each of the organizations.The probability of fast promotion is 0.6,and the probability of slow promotion is 0.4.
Table A.4
-Use the information in Table A.4 and the expected-value rule.Which statement is TRUE?
A)The expected value of the consultant job is more than $300,000.
B)The expected value of the utility analyst job is more than $300,000.
C)The expected value of the research assistant job is less than $250,000.
D)The job with the highest expected value is the research assistant.

Question

Use the following to answer the questions below.
In choosing between three new jobs,Joe MBA considers the potential payoffs over the next three years.The following table contains the payoffs,given the speed of promotion in each of the organizations.The probability of fast promotion is 0.6,and the probability of slow promotion is 0.4.
  Table A.4
-Use the information in Table A.4 and the expected-value rule.Which statement is TRUE?
A)The expected value of the consultant job is more than $300,000. 
B)The expected value of the utility analyst job is more than $300,000. 
C)The expected value of the research assistant job is less than $250,000. 
D)The job with the highest expected value is the research assistant.

Quizplus · Accepted Answer

To calculate the expected value, we need to multiply the payoff with its respective probability for each level of promotion and then add them up.

For the consultant job:

Expected value = (0.6 x $400,000) + (0.4 x $200,000) = $320,000

For the utility analyst job:

Expected value = (0.6 x $350,000) + (0.4 x $250,000) = $320,000

For the research assistant job:

Expected value = (0.6 x $200,000) + (0.4 x $150,000) = $180,000

Therefore, the expected value of both the consultant and utility analyst jobs is more than $300,000, while the expected value of the research assistant job is less than $250,000. The job with the highest expected value is either the consultant or utility analyst job. Since both have the same expected value, either one is a good choice.

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