Your friend finds a burrito in a trashcan. She\'s hungry to the s points point o
ID: 3369904 • Letter: Y
Question
Your friend finds a burrito in a trashcan. She's hungry to the s points point of passing out, forgot her wallet that day, and the burrito doesn't look bad. Being an astute student of inductive logic, she prepares to perform an expected value calculation. Given what she knows about burritos, she assesses the probability of it being kinda bad (K) at 25% and the probability of it being seriously bad (S) at 10% Otherwise, if the burrito is good (G) and she does not get sick, she will make it to the reading of her great aunt's will, where she will be given $1000. If she does not go, then it will be given to someone else. Assume that she will not go if she is ill (K v S). Lost pay due to illness for five days which she thinks is the average time to recover from food poisoning (K), is $300.The price of hospital bills for treatment of serious food poisoning (S) she estimates to be $2000. She has special coverage at work in the case of a hospital stay, thanks to her union, so her pay will not be affected. What is the expected value of eating the burrito? ***Send my your calculations via email**t* O $27 O -$275 O $375 O -$37Explanation / Answer
1. Identify all possible outcomes
If Burrito is good (G), make it to reading of her aunt's will
In Burrito is Kinda good (G), ill for 5 days
In Burrito is seriously bad (S), she will suffer from serious food poisoning
2. A value to each possible outcome
If Burrito is good (G) she will get $ 1000
In Burrito is Kinda good (G), sill will loss $ 300
In Burrito is seriously bad (S), she will loss $ 2000
3. Probability of each possible outcome
P(Burrito is Kinda Bad) = 0.25
P(Burrito is Seriously Bad) = 0.10
P(Burrito is Good) = 1 - 0.25 - 0.10 = 0.65
4. Multiply each value times its respective probability
Burrito is Good = P(Burrito is Good)*Value of that Outcome = 0.65*1000 = 650
Burrito is Kinda Bad = P(Burrito is Kinda Bad)*Value of that Outcome = 0.25*(-300) = -75 (Negative because she will loss)
Burrito is Seriously Bad = P(Burrito is Seriously Bad)*Value of that Outcome = 0.1*(-200) = -200 (Negative because she will loss)
5. Find the sum of the products
The expected value (EV) of a set of outcomes is the sum of the individual products of the value times its probability.
EV = 650-75-200 = 375
Answer: EV = $ 375
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