out of every 10,000 men It is expected that one will be infected Out of every 10
ID: 1127964 • Letter: O
Question
out of every 10,000 men It is expected that one will be infected Out of every 10,000 men, it is expected that one will be infected with HIV and will test positive with a probability of 99.99%. Out of the other men who are not infected with HIV, it is expected that one will also test positive. Therefore, two men will test positive and one of them is infected. What are the chances that a heterosexual man with low-risk behavior who gets a positive HIV test result is actually infected with HIV? You know that the research on mental accounting and framing effects predicts that the integration of gains and losses for otherwise equivalent prospects influences evaluation and choice (Johnson, Herrmann and Bauer 1999). Suppose you are a car manufacturer and you took a class in behavioral economics. You would like to make an offer to the potential buyers who previously owned the automobile in question and were considering repurchasing the product. Each offer is for the same base model of automobile with 10 optional extras. . 8. a) How do mental accounting principles guide you in setting the component prices? Explain.(13 points) b) How do mental accounting principles guide you in setting the component discounts? Explain. (12 points)Explanation / Answer
ANSWER:
TOTAL NO OF MEN = 10,000
PROBABILITY OF 1 MAN HAVING HIV IS 0.01% = 1 / 10,000
PROBABILITY OF 1 MAN NOT HAVING HIV IS 99.99% = 9,999 / 10,000
POSITIVE PROBABILITY OF 1 MEN INFECTED WITH HIV OUT OF 10,000 MEN = 99.9%
NEGATIVE PROBABILITY OF 1 MEN NOT INFECTED WITH HIV OUT OF 10,000 MEN = 0.1% ( 100% - 99.9%)
POSITIVE PROBABILITY OF 9,999 MEN WHO ARE NOT INFECTED WITH HIV , HAVING A HIV INFECTION = 1 / 9999 = 0.01%
NEGATIVE PROBABILITY OF 9,999 MEN WHO ARE NOT INFECTED WITH HIV AND NOT HAVING A HIV INFECTION = 9998 / 9999 = 99.99%
P(HIV) TEST POSITIVE =( .0001 * .999) / ((.0001 * .999) + (.9999 * 0.0001))
= .0000999 / ( .0000999 + .00009999)
= .0000999 / 0.00019989
= 0.499774876 OR 49.98% (APPROX) ROUGHLY 50%
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