Probability is the relative frequency with which an event occurs. Probability he
ID: 3306840 • Letter: P
Question
Probability is the relative frequency with which an event occurs. Probability helps managers make rational decisions in situations involving uncertainty. There are 3 types of probability:
Empirical probability is determined by observation. For example, the number of defects in 10,000 widgets was observed to be 25. So, p(defective) = 25/10,000
Subjective probability – subjective probability measures the likelihood of an event subjectively.
-Rationally derived from experience of the past, knowledge, and conditions of the present.
-A “personal belief”, allowing substantial variation in measures
-Example: based on past experience, I feel that the probability of candidate A winning the election is about 60%.
Classical probability requires enumerating all possible outcomes, counting the outcomes of interest, and computing probability of the outcome(s) of interest = number of outcome(s) of interest/the total number of outcomes.
-Example: if there are 40 even numbers and 60 odd numbers randomly distributed randomly in a box, the probability of drawing an even number, P(even) = 40/(40-60).
The probability rules:
-probability of an outcome can take any value from 0 to 0% (impossible) to 1 to 100% (certainty)
-the probability of all outcomes is 100%
-an event consists of 1 or more outcomes
-the probability of an event not occurring is 1 minus the probability that It occurs
Select ALL valid probabilities values.
A. 50/49
B. 1.01
C. 0%
D. -0.25
E. 49/50
F. 110%
G. 1
Explanation / Answer
A. 50/49
As the value is greater than 1, this is invalid
B. 1.01
As the value is greater than 1, this is invalid
C. 0%
As the value is equal to 0, this is valid
D. -0.25
As the value is less than 0, this is invalid
E. 49/50
As the value is between 0 and 1, this is valid
F. 110%
As the value is greater than 100%, this is invalid
G. 1
As the value is equal to 1, this is valid
The valid ones are C.0% E.49/50 G.1
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