Question

# Use the following information to answer questions 1-5. A vendor at a baseball stadium must decide...

1. Use the following information to answer questions 1-5.

A vendor at a baseball stadium must decide whether to sell ice cream or soft drinks at today’s game. The vendor believes that that the profit will depend on the weather. The payoff table is as follows.

 Decision Alternatives States of Nature Cool Weather (s1) Warm Weather (s2) Sell soft drinks (d1) \$50 \$60 Sell ice cream (d2) \$30 \$90

On the basis of her past experience at this time of year the vendor estimates the probability of warm weather as 0.60 and cool weather as 0.40.

Calculate expected value (d1):

 a. 60 b. 56 c. 55

1 points

QUESTION 2

1. Calculate expected value (d2) :

 a. 66 b. 60 c. 55

1 points

QUESTION 3

1. Using the expected value criterion, what should the vendor sell at today’s game?

 a. Soft drinks b. Ice cream c. Neither

1 points

QUESTION 4

1. The expected value with perfect information, EVwPI=?

 a. 66 b. 48 c. 74

1 points

QUESTION 5

1. The expected value of perfect information, EVPI =?

 a. 18 b. 74 c. 8