The EMV of a Decision with Three States of Nature

question 28

Essay

The EMV of a decision with three states of nature is $50. If the profit/value of A is 1/3 of B and B is 1/3 of C, determine the profit from A if all three states of nature are equally likely to occur.

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Definitions:

Barrier Islands

Narrow, elongated islands lying parallel to the coast, formed largely of sand, protecting the coast from erosion and storms.

Coastal Accumulations

The build-up of sedimentary materials, such as sand and gravel, along coastlines due to oceanic and tidal movements.

Shallow

relating to an area of water that is not deep.

Narrow Islands

Long, slim landforms surrounded by water, often formed by volcanic activity or the buildup of sediment.