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 opportunity loss (EOL)for A3 is
A)3
B)4.5
C)7

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 opportunity loss (EOL)for A3 is
A)3 
B)4.5 
C)7

Quizplus · Accepted Answer

The expected opportunity loss (EOL) for a decision alternative is calculated by multiplying the probability of each state of nature by the opportunity loss for that state of nature and then summing these products. Given that the probability of S1 is 0.5, the probability of S2 (not mentioned but implied since there are usually two states in such problems) would also be 0.5 if we assume only two states of nature and probabilities must sum to 1. Without the specific opportunity losses for A3 under S1 and S2, we cannot calculate the exact EOL. However, if the EOL for A3 is given as an option, it implies that the calculation based on provided or implied data matches that option. Since we cannot perform the specific calculation without the opportunity losses, we rely on the information given in the question and the correct answer provided.

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