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ires Respondus LockDown Browser Left:2:16:20 Tate Corporon: Attempt 1 Previous Page Page 18 of 39 Next Page Note: It is recommended that you save your response as you complete each question. Question 52 (1 point) One of the decision alternatives you are evaluating will be affected by the national unemployment rate. If the rate is below 6 percent (p.2), the expected payoff is $200,000. If the rate is between 6 and 7 percent (p.3), the expected payoff is $150,000. If unemployment is above 7 percent (p-.5), the expected payoff is a loss of $100,000. What is the expected value of the alternative? $35,000 $250,000 $83,333 $135,000 Need more information to compute the expected value Save Question 53 (1 point) You are designing a loading dock for a truck line. You have to decide how many loading and

Explanation / Answer

Question 52

If the rate is below 6 percent, expected pay-off is $200,000 with probability of 0.2

If the rate is between 6 and 7 percent, expected pay-off is $150,000 with probability of 0.3

If the rate is above 7 percent, expected pay-off is a loss of $100,000 with probability of 0.5

Calculate the expected value of the alternative -

Expected value = [$200,000 * 0.2] + [$150,000 * 0.3] - [$100,000 * 0.5]

Expected value = $40,000 + $45,000 - $50,000 = $35,000

Thus,

The expected value of the alternative is $35,000.

Hence, the correct answer is the option (1).

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