3. The government is deciding whether to create a vaccination program to prevent

Question

3. The government is deciding whether to create a vaccination program to prevent a potential epidemic of Zika virus. If there is an epidemic, it wil cost the country s,ooo million (for medical care, lost work-hours, etc.). The vaccination program would cost $40 million If they don't create the vaccination program, there is a 9/10 chance of an epidemic. If they do create the vaccination program, there is still a 1/10 chance of an epidemic a. Draw a 2 x 2 table and label the rows with the available actions (program no program). Label the columns with the possible consequences (epi- demic, no epidemic). In each cell, put the monetary cost in the top-left corner, and put the probability in the bottom-right corner. b. What is the expected monetary value of creating the vaccine program? c. What is the expected monetary value of not creating the program? d. If the government makes their decision based on expected monetary values, will they create the program or not?

Explanation / Answer

(a) 2 X2 Contigency Table

(b) If we create vaccination program,

Expected montary value (cost)= Pr(Epidemic) * Pr(Total cost) + Pr(No epidemic) * Pr(Total cost)

= 1/10 * (1000 + 40) + 9/10 * (40) = $ 140 million

(c) If we dont create vaccination program

Expected montary value(cost) = Pr(Epidemic) * Pr(Total cost) + Pr(No epidemic) * Pr(Total cost)

= 9/10 * (1000) + 1/10 * (0) = $ 900 million

(d) Yes, they should create the program as the total expected monetary cost in creating the program is far less tan not creating the program .

Epidemic No epidemic Program $ 1040 (1/10) $ 40 (9/10) No program $ 1000 (9/10) $ 0 (1/10)

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.