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Bob Sparrow purchases steak from a local meatpacking house. The meat is purchased on Monday at...

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Statistics

Bob Sparrow purchases steak from a local meatpacking house. Themeat is purchased on Monday at $2.00 per pound, and the shop sellsthe steak for $3.00 per pound. Any steak left over at the end ofthe week is sold to a local zoo for $0.50 per pound. The possibledemands for steak and the probability of each are shown in thefollowing table:

Demand (lbs.) Probability

20 0.2

21 0.3

22 0.5

Bob must decide how much steak to order in a week. Bob wants tomaximize expected value. What is his expected value when purchasingoptimally? [Hint: construct a payoff table for each of hisdecisions and each state of nature.] A) 20 B) 20.5 C) 20.25 D) 219.

What is Bob Sparrow’s Expected Value of Perfect Information? A)20.5 B) 1.3 C) 0.8 D) 1.05

Answer & Explanation Solved by verified expert
3.8 Ratings (360 Votes)
The possible outcomes for profit for each initial stock values of 20 21 and 22 are computed here as Estock of 20 203 2 20 as all will be sold    See Answer
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