Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.For Dan's decision problem, the variable "net loss of $500,000" is one of the ___.
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities

Question

Quizplus · Accepted Answer

The variable "net loss of $500,000" is one of the payoffs because it is a possible outcome of Dan's decision to drill a well.

Dan Hein Owns the Mineral and Drilling Rights to a 1,000