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 $50,000,but if he drills a well and strikes oil his net gain will be $100,000.If he does not drill,his loss is the cost of the mineral and drilling rights,which amount to $1000.For Dan's decision problem,the variable "net loss of $50,000" is one of the ___.
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities

Question

Quizplus · Accepted Answer

The net loss of $50,000 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