A fashion designer wants to produce a new line of clothes.In the production of the clothes,expensive,medium-priced,or inexpensive materials can be used.The profit associated with each type of material depends upon economic conditions next year.Below you are given the payoff table.

$$\begin{array} { c | c c c }
\text { Decisions } & \begin{array} { c }
\text { Economy } \
\text { Improves }
\end{array} & \begin{array} { c }
\text { Economy } \
\text { Stays the Same }
\end{array} & \begin{array} { c }
\text { Economy } \
\text { Gets Worse }
\end{array} \
\hline \text { Expensive } & 80,000 & 40,000 & 10,000 \
\text { Medium } & 40,000 & 60,000 & 70,000 \
\text { Inexpensive } & 10,000 & 30,000 & 60,000
\end{array}$$ An economist believes that the probability that the economy will improve is 20%,the probability that the economy will stay the same is 70%,and the probability that the economy will get worse is 10%.

a.Compute the expected value for each investment.Which investment is the best?
b.Compute the expected value of perfect information.

Question

A fashion designer wants to produce a new line of clothes.In the production of the clothes,expensive,medium-priced,or inexpensive materials can be used.The profit associated with each type of material depends upon economic conditions next year.Below you are given the payoff table.
​
​
 $$\begin{array} { c | c c c } 
\text { Decisions } & \begin{array} { c } 
\text { Economy } \
\text { Improves }
\end{array} & \begin{array} { c } 
\text { Economy } \
\text { Stays the Same }
\end{array} & \begin{array} { c } 
\text { Economy } \
\text { Gets Worse }
\end{array} \
\hline \text { Expensive } & 80,000 & 40,000 & 10,000 \
\text { Medium } & 40,000 & 60,000 & 70,000 \
\text { Inexpensive } & 10,000 & 30,000 & 60,000
\end{array}$$ An economist believes that the probability that the economy will improve is 20%,the probability that the economy will stay the same is 70%,and the probability that the economy will get worse is 10%.
​ 
a.Compute the expected value for each investment.Which investment is the best?
b.Compute the expected value of perfect information.​

Quizplus · Accepted Answer

The Answer of A fashion designer wants to produce a new line of clothes.In the production of the clothes,expensive,medium-priced,or inexpensive materials can be used.The profit associated with each type of material depends upon economic conditions next year.Below you are given the payoff table.
​
​
 $$\begin{array} { c | c c c } 
\text { Decisions } & \begin{array} { c } 
\text { Economy } \
\text { Improves }
\end{array} & \begin{array} { c } 
\text { Economy } \
\text { Stays the Same }
\end{array} & \begin{array} { c } 
\text { Economy } \
\text { Gets Worse }
\end{array} \
\hline \text { Expensive } & 80,000 & 40,000 & 10,000 \
\text { Medium } & 40,000 & 60,000 & 70,000 \
\text { Inexpensive } & 10,000 & 30,000 & 60,000
\end{array}$$ An economist believes that the probability that the economy will improve is 20%,the probability that the economy will stay the same is 70%,and the probability that the economy will get worse is 10%.
​ 
a.Compute the expected value for each investment.Which investment is the best?
b.Compute the expected value of perfect information.​

A Fashion Designer Wants to Produce a New Line of Clothes.In