1.Based on the below decision tree and the following probabilities answer the be
ID: 362010 • Letter: 1
Question
1.Based on the below decision tree and the following probabilities answer the below question:
Probability of an improving economy is 0.59,
When you have an improving economy the probability of high demand is 0.7
When you have a not improving economy the probability of high demand is 0.37
What is the value of F?
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2.The following are the results from Calculate New Probabilities 1 ( Video Chapt 6 part 2C). They are our joint and marginal probabilities.
Based on this data, we will calculate our posterior probabilities. These are the new probabilities we will use in our trees.
The probability of having an Improving Economy (ending up in the Improving Economy part of the decision tree) is?
Improving Economy Not improving economy Given high demand 0.21 0.11 Given Low demand 0.12 0.56 Payoff When you have a not improving economy lle piUWAJIty UI TliyTULIMUTU TJU.U. Decision alternative State of Nature High Demand A. Expand Low Demand 2200 1400 Improving Economy BOutsource High Demand Low Demand 1800 1700 PG C. Expand High Demand Low Demand F. Not Improving Economy o oestanden en de D. Outsource High Demand Low Demand What is the value of F? Answer Format: Number: Round to: 2 decimal places. Enter Answer Here...Explanation / Answer
1)
A. Expand = SUMPRODUCT (Probability, Value) = 0.7*2200 + 0.3*1400 = 1960
B. Outsource = 0.7*1800 + 0.3*1700 = 1770
So, For E. Improving economy = Max(1960,1770) = 1960
C. Expand = 0.37*2200 + 0.63*1400 = 1696
D. Outsource = 0.37*1800 + 0.63*1700 = 1737
So, for F = Max(1696,1737) = 1737
G = Max(E,F) = Max(1960,1737) = 1960
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