Refer to the Following Payoff Table

question 58

Multiple Choice

Refer to the following payoff table:

There is an option of paying $100 to have research done to better predict which state of nature will occur. When the true state of nature is S1, the research will accurately predict S1 60% of the time. When the true state of nature is S2, the research will accurately predict S2 80% of the time.
Given that the research is done, what is the joint probability that the state of nature is S2 and the research predicts S1?

• A) 0.08
• B) 0.16
• C) 0.24
• D) 0.32
• E) 0.36

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Definitions:

Wealth

The abundance of valuable resources or material possessions, or the control of such assets.

Honor

The quality of being honest and having strong moral principles; a sense of moral uprightness.

Consumer Nondurable

Goods that are immediately consumed or have a lifespan of less than three years, such as food and clothing.

Medical Care

Professional services provided by individuals or institutions to individuals for the purpose of maintaining, improving, or managing health.