? Amazon.com-Online Sh. -TripAdvisor ??CengageNOW2 Online t.\" connect Chapter 5

Question

? Amazon.com-Online Sh. -TripAdvisor ??CengageNOW2 Online t." connect Chapter 5 Homework Question 5 (of 10) value 3.00 points Organizers of an outdoor summer concert in Toronto are concemed about the weather conditions on the day of the concert. They will make a profit of $39,000 on a clear day and $14,000 on a cloudy day. They will make a loss of $5,000 if it rains. The weather channel has predicted a 46% chance of rain on the day of the concert Calculate the expected profit from the concert if the like It ood is 12% that it will be sunny and 42% that it will be cloudy Expected profit References eBook & Resources Worksheet Learning Objective: 05-03 Calculate and interpret summary measures for a discrete random variable Difficulty: 3 Hard Learning Objective: 05-04 Distinguish n risk-neutral, risk-averse, and tisk- loving consumers

Explanation / Answer

LET X1= $ 39000 ( PROFIT IN SUNNY DAY) , THEN P1= 0.12 ( PROBABILITY OF SUNNY DAY)

X2 = $ 14000 ( PROFIT IN CLOUDY DAY) . THEN P2 = 0.42 (PROBABILITY OF CLOUDY DAY, GIVEN)

X3 = $ 5000 ( LOSS IN RAINY DAY ) THEN P3 = 0.46 ( PROBABILITY OF RAINY DAY )

HENCE EXPECTED PROFIT = P1X1 +P2X2 + P3X3

  = 0.12 X $ 39000 + 0.42 X $ 14000 + 0.46 X ( - $ 5000 ) , LOSS IN NEGATIVE

= $ 4680 + $ 5880 - $ 2300 =  $ 8260

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