A Company Is Considering Producing a New Children's Bar Soap

question 30

Multiple Choice

A company is considering producing a new children's bar soap.A market research firm has told the company that if they perform a survey, a positive survey of a favorable market occurs 65 percent of the time.That is, P(positive survey | favorable market) = 0.65.Similarly, 40 percent of the time the survey falsely predicts a favorable market; thus, P(positive survey | unfavorable market) = 0.40.These statistics indicate the accuracy of the survey.Prior to contacting the market research firm, the company's best estimate of a favorable market was 50 percent.So, P(favorable market) = 0.50 and P(unfavorable market) = 0.50.Using Bayes' theorem, determine the probability of a favorable market given a favorable survey.

• A)0.62
• B)0.38
• C)0.53
• D)0.65

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Definitions:

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