With equally likely states of nature, the alternative that has the largest expected monetary value is:
A)A
B)B
C)C
D)D
E)E

Question

Quizplus · Accepted Answer

The expected monetary value for each alternative is:

A: (0.2 * 50) + (0.3 * 100) + (0.5 * 0) = 30
B: (0.2 * 60) + (0.3 * 80) + (0.5 * 40) = 52
C: (0.2 * 70) + (0.3 * 60) + (0.5 * 60) = 58
D: (0.2 * 80) + (0.3 * 40) + (0.5 * 70) = 54
E: (0.2 * 90) + (0.3 * 20) + (0.5 * 80) = 54

Therefore, alternative B has the largest expected monetary value of $52.

With Equally Likely States of Nature, the Alternative That Has