The decision tree shows the profit outcomes for a coffee shop in a strong and a weak economy for next year. Suppose a third outcome is considered in which a moderate economy is 33 percent likely to occur. With this added outcome, how does the probability of a weak economy change?
A) A weak economy is now 73 percent likely.
B) A weak economy is also 33 percent likely.
C) A weak economy is now 40 percent likely.
D) A weak economy is now 0 percent likely.

Question

The decision tree shows the profit outcomes for a coffee shop in a strong and a weak economy for next year. Suppose a third outcome is considered in which a moderate economy is 33 percent likely to occur. With this added outcome, how does the probability of a weak economy change? 
A) A weak economy is now 73 percent likely. 
B) A weak economy is also 33 percent likely. 
C) A weak economy is now 40 percent likely. 
D) A weak economy is now 0 percent likely.

Quizplus · Accepted Answer

C) The addition of a third option of a moderate economy that is 33 percent likely to occur reduces the likelihood of a weak economy. Since the sum of all outcomes must equal 100 percent, or 1.0, the probability of a weak economy is 1.0 - 0.27 - 0.33, or 0.40.

The Decision Tree Shows the Profit Outcomes for a Coffee