A rock concert producer has scheduled an outdoor concert. The outside temperatur
ID: 2820911 • Letter: A
Question
A rock concert producer has scheduled an outdoor concert. The outside temperature is either warm, cool, or very cold. If it is warm that day, she expects to make a $20,000 profit. If it is cool that day, she expects to make a $5,000 profit. If it is very cold that day, she expects to suffer a $12,000 loss. Based upon historical records, the weather office has estimated the chances of a warm day to be 60%; the chances of a cool day to be 25%. What is the producer’s expected profit? Choose the answer closest to your calculations.
Simple average of: $20,000, $5,000, and -$12,000Explanation / Answer
Probability of Very cold day=(100-60-25)=15%
Hence expected profit=Respective profits*Respective Probability
=($20000*0.6)+(5000*0.25)-($12000*0.15)
which is equal to
=$11450.
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