The Local Operations Manager for the IRS Must Decide Whether

question 87

Short Answer

The local operations manager for the IRS must decide whether to hire 1, 2, or 3 temporary workers. He estimates that net revenues (in thousands) will vary with how well taxpayers comply with the new tax code.
$$\begin{array} { c c c c } \hline \text { \# of Workers } & \begin{array} { c } \text { Low } \\\text { Compliance }\end{array} & \begin{array} { c } \text { Medium } \\\text { Compliance }\end{array} & \begin{array} { c } \text { High } \\\text { Compliance }\end{array} \\\hline 1 & 50 & 50 & 50 \\2 & 100 & 60 & 20 \\3 & 150 & 70 & - 10 \\\hline\end{array}$$
-If he thinks the chances of low, medium, and high compliance are 20%, 30%, and 50%, respectively, what is the expected value of perfect information?

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