What is the expected value for the decision alternative to write the economics book?
A)50,000 copies
B)40,000 copies
C)32,000 copies
D)30,500 copies
E)10,500 copies

Question

Quizplus · Accepted Answer

To calculate the expected value, we need to multiply the probability of each possible outcome by its respective payoff and then sum up these values. Assuming equal probabilities for each outcome, the expected value for the decision alternative to write the economics book would be:

(0.2 x 50,000) + (0.3 x 40,000) + (0.4 x 32,000) + (0.1 x 10,500) = 32,000

Thus, the best choice would be to write the economics book, as it has the highest expected value compared to the other decision alternatives.

What Is the Expected Value for the Decision Alternative to Write