MACROECONOMICS-W/MINDTAP
15th Edition
ISBN: 9781305361409
Author: Gwartney
Publisher: CENGAGE L
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Chapter 19, Problem 2CQ
To determine
Comparison of the purchase of items from foreigners with the sale of items to foreigners.
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In a classic oil-drilling example, you are trying to decide whether to drill for oil on a field that might or might not contain any oil. Before making this decision, you have the option of hiring a geologist to perform some seismic tests and then predict whether there is any oil or not. You assess that if there is actually oil, the geologist will predict there is oil with probability 0.85 . You also assess that if there is no oil, the geologist will predict there is no oil with probability 0.90. Please answer the two questions below, as I am trying to ensure that I am correct.
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