The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.

If she feels the chances of low, medium, and high demand are 50 percent, 20 percent, and 30 percent respectively, what is her expected value of perfect information?
A)$54,000
B)$65,000
C)$70,000
D)$80,000
E)$135,000

Question

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.

If she feels the chances of low, medium, and high demand are 50 percent, 20 percent, and 30 percent respectively, what is her expected value of perfect information?
A)$54,000 
B)$65,000 
C)$70,000 
D)$80,000 
E)$135,000

Quizplus · Accepted Answer

The Answer of The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.

If she feels the chances of low, medium, and high demand are 50 percent, 20 percent, and 30 percent respectively, what is her expected value of perfect information?
A)$54,000 
B)$65,000 
C)$70,000 
D)$80,000 
E)$135,000

The New Owner of a Beauty Shop Is Trying to Decide