Before the board meeting the CEO obtained a market demand forecast report. in the past, when the demand was high, the forecast indicated high demand 80% of the time. When the demand was low, the forecast indicated low demand 70% of the time. The latest forecast indicates high demand. a Compute the revised probabilities with Bayes rule now that you know that the latest forecast indicates bigb demand. b. Interpret the impact of the latest forecast on the prior probabilities

Before the board meeting the CEO obtained a market demand forecast report. in the past, when the demand was high, the forecast indicated high demand 80% of the time. When the demand was low, the forecast indicated low demand 70% of the time. The latest forecast indicates high demand. a Compute the revised probabilities with Bayes rule now that you know that the latest forecast indicates bigb demand. b. Interpret the impact of the latest forecast on the prior probabilities

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

See similar textbooks

Related questions

Q: risk neutral and plans using expected value approach. ii. a risk lover iii. if your sister planned…

Q: new and innovative children's toys. As with other products, Specialty faces the decision of how may…

Q: (e) At which store is the expected number of DVDS rented per customer higher? (f) If Video to Go…

Q: Suppose you want to build a diversified and risk-averse portfolio. However, there is one "dark…

Q: 2. (Mean or Expected Value) In a lottery, there are 25 prizes of $5, 5 prizes of $25, and one prize…

A: 2. It is given that there are 25 prices of $5, 5 prizes of $25 and 1 prize of $100. Thus, the random…

Q: Oxnard Petro Ltd. is buying hurricane insurance for its off-coast oil drilling platform. During the…

A: It is given that the probability of total loss of only the above water superstructure is 0.40, the…

Q: Which phases should be carried out by the analyst before the probabilities are quantified? A.…

A: Solution Given information phases should be carried out by the analyst before the probabilities are…

Q: An investor iIs worried about the company's profit projections which investors think are too…

Q: Assume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom.…

Q: You are trying to build a model to predict the probability of winning over/under bets for total…

A: Given that to build a model to predict the probability of winning over/under bets for total points…

Q: Sociologists say that 80% of married women claim that their husband's mother is the biggest bone of…

A: Solution: Note: Hello! As you have posted more than 3 sub parts, we are answering the first 3…

Q: Suppose a linear probability model you have developed finds there are two factors influencing the…

A: Given Profit margin 6% Debt ratio 45%

Q: A lottery posted the probabilities of winning each prize and the prize amounts as shown in the chart…

A: Suppose x is the prize amount from the lottery.

Q: At the beginning of each day, a patient in the hospital is classifed into one of the three…

A: Let the conditions good, fair, critical, improved, unimproved and dead be represented by G, F, C, I,…

Q: 7. Police plan to enforce speed limits by using radar traps at 4 different locations within the city…

A: given dataP(A)=0.2P(B)=0.1P(C)=0.5P(D)=0.2P(speeding ticket)=P(E)∴P(E|A)=0.40 P(E|B)=0.30…

Q: Suppose a linear probability model you have developed finds there are two factors influencing the…

A: Given Profit margin 7% Debt ratio 52%

Q: In finance the notion of expected value is used to analyze investments for which the investor has an…

A: Let X be a random variable denotes the amount of return for the investment. The probability mass…

Q: You are working for a bank and your supervisor asked you to predict the default risk for cach of the…

Q: Many track hurdlers believe that they have a better chance of winning if they start in the inside…

A: The claim is that the probabilities of winning are the same in the different positions.

Q: An investor in Microsoft is worried the latest management earnings forecast is too aggressive and…

A: let G = Good Report M=Medium Report B=Bad Report From given P(G)=0.2 P(M)=0.5 P(B)=0.3 P(Bf|G)=0.1…

Q: You play a game in which 30% of the time you will WIN $5 and 70% of the time you will LOSE $3. What…

A: It is given that, there is 30% chance to win $5 and 70% chance to lose $3.

Q: Granny Maggie has been investing in government bonds and corporate stocks since her mid 30’s. Now,…

A: The objective is to find out the expected return and sd of return on Granny's gold investment.…

Q: A lawyer considers taking a case figures that there is a 40% chance of winning the case in court and…

A: Solution: From the given information, it can be observed that the probability of winning the case in…

Q: ociologists say that 95% of married women claim that their husband's mother is the biggest bone of…

A: GIVEN: Pmarried women disliking their mother in law=0.95p=0.95 q=1-p=0.05 sample size n=9 ⇒The given…

Q: Examine the table above . The insurance company does not know the probabilities of falling sick for…

A: The table shows the probability of falling sick of individuals and the total insured income to be…

Q: Organizers of an outdoor summer concert in Toronto are concerned about the weather conditions on the…

A: Given data : Profit on the clear day = 33,000 Profit on the cloudy day = 15,000 Loss on rainy day…

Q: Sociologists say that 85% of married women claim that their husband's mother is the biggest bone of…

A: Given: p= proportion of women who dislike their mother-in-law = 0.85 n=Number of married women = 7…

Q: UG believes that a game turning into a blockbuster is related to pre-release marketing events. Each…

A: Let X denote the number of events that result in success. There are in total 6 events and the…

Q: ANOTHER EXAMPLE • Consider the following information on returns and probabilities: State…

A: Given information: State Probability X Z Boom 0.25 15% 10% Normal 0.60 10% 9% Recession…

Q: Investment advisors recommend risk reduction through international diversification. International…

Q: A study shows the following one-generation transition probabilities among four major income groups.…

A: Bottom 10%10% - 50%50% - 90%Top 10%Bottom…

Q: Sociologists say that 85% of married women claim that their husband's mother is the biggest bone of…

A: Given that n=6 , p=85%=0.85 , q=1-p=1-0.85=0.15 X~Binomial(n=6,p=0.85)

Q: Sociologists say that 85% of married women claim that their husband's mother is the biggest bone of…

Q: A consultant has been hired to redesign a company's production facility. The consultant estimates…

A: Assume that the random variable x defines the profit.

Concept explainers

Compound Probability

Compound probability can be defined as the probability of the two events which are independent. It can be defined as the multiplication of the probability of two events that are not dependent.

Tree diagram

Probability theory is a branch of mathematics that deals with the subject of probability. Although there are many different concepts of probability, probability theory expresses the definition mathematically through a series of axioms. Usually, these axioms express probability in terms of a probability space, which assigns a measure with values ranging from 0 to 1 to a set of outcomes known as the sample space. An event is a subset of these outcomes that is described.

Conditional Probability

By definition, the term probability is expressed as a part of mathematics where the chance of an event that may either occur or not is evaluated and expressed in numerical terms. The range of the value within which probability can be expressed is between 0 and 1. The higher the chance of an event occurring, the closer is its value to be 1. If the probability of an event is 1, it means that the event will happen under all considered circumstances. Similarly, if the probability is exactly 0, then no matter the situation, the event will never occur.

Question

ve Aswe
The CEO must present a plan to the board whether to build a small plant or a large plant for the company. The payoff table (in S) is as follows:
Action
Event
Probability Small plant
Large plant
High demand 0.65
270
195
480
Low demand 0.35
100
Before the board meeting, the CEO obtained a market demand forecast report. in the past, when the demand was high, the forecast indicated high demand 80% of the
time. When the demand was low, the forecast indicated low demand 70% of the time. The latest forecast indicates high demand.
a. Compute the revised probabilities with Bayes' rule now that you know that the latest forecast indicates high demand.
b. Interpret the impact of the latest forecast on the prior probabilities

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

$Conditional Probability, Decision Trees, and Bayes' Theorem$

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, probability and related others by exploring similar questions and additional content below.

Similar questions

Suppose an oil company is thinking of buying some land for $10,000,000. There is a 60%60% chance of economic growth and a 40%40% chance of recession. The probability of discovering oil is 44%44% when there is economic growth and 32%32% when there is a recession. If there is economic growth and the oil company discovers oil, the value of the land will triple. If they do not discover oil, the value of the land will decrease by 10%.10%. If there is a recession and the company discovers oil, the value of the land will increase by 50%.50%. If they do not discover oil, the land will decrease in value by 75%.75%. What is the expected value of the investment? Give your answer to the nearest dollar. Avoid rounding within calculations. $$ Select the correct interpretation of the expected value. The expected value represents what the actual investment value will be for this land purchase of $10,000,000. The company should make the investment because the expected value…
Indicate whether the statement is true or false, and justify your answer.All perceived probabilities are weighted lower than actual probabilities.
Sociologists say that 95% of married women claim that their husband's mother is the biggest bone of contention in their marriages (sex and money are lower-rated areas of contention). Suppose that seven married women are having coffee together one morning. Find the following probabilities. (Round your answers to three decimal places.) (a) All of them dislike their mother-in-law.(b) None of them dislike their mother-in-law.(c) At least five of them dislike their mother-in-law.
You have done risk analysis and determine the following risks and their probabilities could affect your project. Based on these risks, what should you contingency reserve be? Risk 1: 50% chance of a weather delay costing $5,000Risk 2: 20% chance of a worker strike costing $10,000Risk 3: 10% chance of catastrophic failure costing $50,000
At the beginning of each day, a patient in the hospital is classifed into one of the three conditions: good, fair or critical. At the beginning of the next day, the patient will either still be in the hospital and be in good, fair or critical condition or will be discharged in one of three conditions: improved, unimproved, or dead. The transistion probabilities for this situation are Good Fair Critical Good 0.65 0.20 0.05 Fair 0.50 0.30 0.12 Critical 0.51 0.25 0.20 Improved Unimproved Dead Good 0.06 0.03 0.01 Fair 0.03 0.02 0.03 Critical 0.01 0.01 0.02 For example a patient who begins the day in fair condition has a 12% chance of being in critical condition the next day and a 3%…
There are two bags of marbles. Each bag has 1 red and 1 blue marble. First, a marble is drawn from bag 1 and placed in bag 2. Next, a marble from bag 2 is drawn and placed in bag 1. Finally, one of the marbles from bag 1 is drawn. What is the probability of drawing the same color of marble each time? Draw a tree diagram.
Sociologists say that 80% of married women claim that their husband's mother is the biggest bone of contention in their marriages (sex and money are lower-rated areas of contention). Suppose that seven married women are having coffee together one morning. Find the following probabilities. (Round your answers to three decimal places.) (a) All of them dislike their mother-in-law. (b) None of them dislike their mother-in-law. (c) At least five of them dislike their mother-in-law. (d) No more than four of them dislike their mother-in-law.
b. Demand for electricity next year is projected to be one of the following quantities: 18,000GWH with probability of 0.4, 25,000GWh with probability of 0.4, or 30,000GWH. i. If this year's demand is 17,500GWH, what should be the additional amount to plan against if the energy ministry would want to plan for the increase using expected value analysis? ii. What is the standard deviation of the suggested accompanying amount?
Part 2) Five hundreds tickets are sold at $ 2 each for a smartphone valued at $ 1000. What is the expected value of the gain if you purchase one ticket?