TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature.
-Referring to Table 19-1, if the probability of S1 is 0.5, what is the optimal alternative using EMV?
A) A1
B) A2
C) A3
D) It cannot be determined.

Question

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. 
-Referring to Table 19-1, if the probability of S1 is 0.5, what is the optimal alternative using EMV?
A) A1 
B) A2 
C) A3 
D) It cannot be determined.

Quizplus · Accepted Answer

The optimal alternative using EMV (Expected Monetary Value) is the one with the highest EMV. Given the probability of S1 is 0.5, you would calculate the EMV for each alternative and choose the one with the highest value.

TABLE 19-1 The Following Payoff Table Shows Profits Associated with a Set