Refer to the Following Payoff Table

question 43

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 S2?

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

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Definitions:

Monopoly Markets

Markets dominated by a single seller, leading to less competition and higher prices for consumers.

Government Intervention

Actions taken by a government to affect the economy, which can include regulations, subsidies, tariffs, and fiscal or monetary policies.

Deadweight Loss

The reduction in economic productivity that happens when a good or service does not reach or cannot reach its equilibrium state.

Natural Monopoly

A market condition where a single firm can provide a good or service at a lower cost than any competitors, due to economies of scale.