SCENARIO 19-6
a Student Wanted to Find Out the Optimal

question 88

Short Answer

SCENARIO 19-6
A student wanted to find out the optimal strategy to study for a Business Statistics exam. He
constructed the following payoff table based on the mean amount of time he needed to study every
week for the course and the degree of difficulty of the exam. From the information that he gathered
from students who had taken the course, he concluded that there was a 40% probability that the exam
would be easy. $$\begin{array} { | l | l | l | l | } \hline & 16 \text { hours } & 8 \text { hours } & 4 \text { hours } \\\hline \text { Easy Exam } & 40 & 60 & 80 \\\hline \text { Difficult Exam } & 100 & 50 & 0 \\\hline\end{array}$$
-Referring to Scenario 19-6, what is the maximum amount that the student is willing to pay to obtain
perfect information?

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Definitions:

Induce

To lead or move by persuasion or influence, as to some action or state of mind.

Failures

Instances where intended outcomes are not achieved or experiments do not produce expected results.

Type I Errors

Errors that occur when a researcher incorrectly rejects a true null hypothesis, indicating a false positive.

Type II Errors

Also known as a false negative, it occurs when a test fails to reject a false null hypothesis; not detecting an effect that is present.