In this homework, I need to select correct option with explainatin, pls help Which expected opportunity loss table is appropriate given the opportunity losstable below? The probability of a market rise is P = 0.7 and the probability of amarket decline is P = 0.3ActOpportunity Loss (S)Market RiseMarket DeclineInvestment 14,000Investment 23,000Expected OpportunityLoss (S)PurchaseInvestment 14,000Investment 24,000Expected OpportunityLoss (S)PurchaseInvestment 11,200Investment 21,200Expected OpportunityLoss ($)PurchaseInvestment 1Investment 21,000Expected OpportunityLoss (S)PurchaseInvestment 12.800Investment 2900

Expected opportunity loss is calculated by Expected opportunity loss=probability of a market…

Answered: Which expected opportunity loss table…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.8P

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Three decision makers have assessed utilities for the problem whose payoff table appears below. State of Nature Decision s1 s2 s3 D1 500 100 -400 D2 200 150 100 D3 -100 200 300…
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Many decision problems have the following simplestructure. A decision maker has two possible decisions, 1 and 2. If decision 1 is made, a sure cost of c isincurred. If decision 2 is made, there are two possibleoutcomes, with costs c1 and c2 and probabilities p and1 2 p. We assume that c1 , c , c2. The idea is thatdecision 1, the riskless decision, has a moderate cost,whereas decision 2, the risky decision, has a low costc1 or a high cost c2.a. Calculate the expected cost from the riskydecision.b. List as many scenarios as you can think of thathave this structure. (Here’s an example to get youstarted. Think of insurance, where you pay a surepremium to avoid a large possible loss.) For eachof these scenarios, indicate whether you wouldbase your decision on EMV or on expected utility
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1. A dealer decides to sell a rare book by means of an English auction with a reservation price of 54. There are two bidders. The dealer believes that there are only three possible values, 90, 54, and 45, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue is approximately ______. 2. A seller knows that there are two bidders for the object he is selling. He believes that with probability 1/2, one has a buyer value of 5 and the other has a buyer value of 10 and with probability 1/2, one has a buyer value of 8 and the other has a buyer value of 15. He knows that bidders will want to buy the object so long as they can get it for their buyer value or less. He sells it in an English auction with a reserve price which he must…
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Does the risk correspond to the dispersion, or uncertainty, impossible outcomes?
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