SCENARIO 20-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.

-Referring to Scenario 20-1,if the probability of S1 is 0.5,then the expected monetary value (EMV )for A2 is
A)3
B)4
C)6.5

Question

SCENARIO 20-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.

-Referring to Scenario 20-1,if the probability of S1 is 0.5,then the expected monetary value (EMV )for A2 is
A)3 
B)4 
C)6.5

Quizplus · Accepted Answer

To calculate the EMV for A2, we need to multiply the profit associated with A2 under each state of nature by the probability of that state and add up the results. 
EMV(A2) = (3*0.5) + (5*0.5) = 4
Therefore, the expected monetary value for A2 is 4. 
The best choice would be to select A2 as it has the highest EMV among the three alternatives.

SCENARIO 20-1 The Following Payoff Table Shows Profits Associated with a Set