9. A new product has the following profit projections and associatedprobabilities:Profit$150,000$100,000$ 50,000$0-$ 50,000-$100,000Probability0.100.250.200.150.200.10 d. Use expected utility to make a recommended decision.e. Should the decision maker feel comfortable with the final decisionrecommended by the analysis?

Expected Utility: In decision theory expected utility represents the average utility or satisfaction…

Answered: d. Use expected utility to make a…

d. Use expected utility to make a recommended decision. e. Should the decision maker feel comfortable with the final decision recommended by the analysis?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Risk and Uncertainty

Uncertainty refers to a situation when there is one possible outcome of a decision but where the probability of occurrence of each particular outcome is not known or cannot be estimated.

Question

9. A new product has the following profit projections and associated
probabilities:
Profit
$150,000
$100,000
$ 50,000
$0
-$ 50,000
-$100,000
Probability
0.10
0.25
0.20
0.15
0.20
0.10

d. Use expected utility to make a recommended decision.
e. Should the decision maker feel comfortable with the final decision
recommended by the analysis?

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