A High-School Student Who Started Doing Photography as a Hobby

question 18

Essay

A high-school student who started doing photography as a hobby is considering going into the photography business. The anticipated payoff table is: $\begin{array} { ccc }&\text { Alternative }\\\text { State of Nature }& \text { Start new business}& \text { Do not start new business}\\\text { Poor } & -\$ 12000 & 0 \\\text { Fair } & \$ 10000 & 0 \\\text { Super } & \$ 15000 & 0 \\\end{array}$
The following prior probabilities are assigned to the states of nature:
P(poor) = 0.4, P(fair) = 0.4 , P(super) = 0.2.
a. Calculate the expected monetary value for each act with present information. What decision should be made using the EMV criterion?
b. Convert the payoff table to an opportunity loss table.
c. Calculate the expected opportunity loss for each act with present information. What decision should be made using the EOL criterion?
d. Review the decisions made in a. and c. Is this a coincidence? Explain.
e. What is the expected payoff with perfect information?
f. What is the expected value of perfect information? What does it mean?

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Definitions:

Patient

An individual who is receiving medical care or treatment.

Seventh Characters

Typically refers to the additional digits used in coding systems like ICD-10 to provide more detail about a diagnosis or encounter.

Fracture Healing

The process by which bone repairs itself following a break or crack, involving the stages of inflammation, bone production, and bone remodeling.

Patient Seen

A term indicating that a patient has been examined or consulted by a healthcare professional.