A Federal Agency Is Trying to Decide Which of Two

question 32

Short Answer

A federal agency is trying to decide which of two waste management projects to investigate as the source of air pollution. In the past, projects of the first type were in violation of air quality standards with probability 0.3 on any given day, while projects of the second type were in violation of air quality standards with probability 0.25 on any given day. It is not possible for both projects to pollute the air in one day. Let A_i, i = 1, 2, denote that project of type i was in violation of air quality standards.
a. Find the probability of an air pollution problem caused by either the first project or the second project.
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b. If the first project is violating air quality standards, what is the probability the second project is also violating federal air quality standards?
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Definitions:

Direct Price Discrimination

A pricing strategy where a seller charges different prices to different customers for the same product or service, based on their willingness to pay.

Inelastic Demand

A situation in which demand for a good or service is barely affected by changes in price.

Elastic Demand

When consumer demand for a product significantly rises or falls following a small change in its price.

Price Discrimination

The practice of selling the same product to different buyers at different prices, based on factors other than cost.