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The Probability - Buisness Management - Exam, Exams of Business Administration

Shoolini University of Biotechnology and Management SciencesBusiness Administration

In the following Exam of Business Management, the examiner has asked the following queries from the students : The Probability, Positive, Negative, Success And Positive, Success And Negative, Diagram, Market Research, Expected Value Given Positive, Expected Value Given Negative, Value

Typology: Exams

2012/2013

Uploaded on 07/26/2013

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Solutions to Exercises 6
1. The probability tree is
Therefore
(a) P(SS S) = 0.9×0.9×0.9 = 0.729.
(b) P(F SS ) = 0.1×0.5×0.5 = 0.025.
(c)
P(only one S) = P(SF F or F SF or FFS)
= 0.9×0.1×0.5+0.1×0.5×0.5+0.1×0.5×0.5
= 0.045 + 0.025 + 0.025
= 0.095.
(d) P(FFF) = 0.1×0.5×0.5 = 0.025.
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Solutions to Exercises 6

  1. The probability tree is

Therefore (a) P (SSS) = 0. 9 × 0. 9 × 0 .9 = 0. 729. (b) P (F SS) = 0. 1 × 0. 5 × 0 .5 = 0. 025. (c)

P (only one S) = P (SF F or F SF or F F S) = 0. 9 × 0. 1 × 0 .5 + 0. 1 × 0. 5 × 0 .5 + 0. 1 × 0. 5 × 0. 5 = 0.045 + 0.025 + 0. 025 = 0. 095.

(d) P (F F F ) = 0. 1 × 0. 5 × 0 .5 = 0. 025.

  1. (a) The probability tree is as follows.

i. P (positive) = 0.3 + 0.2 = 0. 5. ii. P (negative) = 0.1 + 0.4 = 1 − P (positive) = 0. 5. iii.

P (success |positive) = P^ (success and positive) P (positive)

= 00 ..^35 = 0. 6

iv.

P (failure |positive) = 1 − P (success |positive) = 1 − 0 .6 = 0. 4

v.

P (success |negative) = P^ (success and negative) P (negative)

=

0. 5 = 0.^2

vi.

P (failure |negative) = 1 − P (success |negative) = 1 − 0 .2 = 0. 8

(f) The expected values for the other three options are as follows.

  • Do nothing: £ 0.
  • Go ahead without market research:
  1. 4 × £ 90 , 000 − 0. 6 × £ 30 , 000 = £ 18 , 000.
  • Sell: £ 10,

(g) The owner’s best strategy is therefore to go ahead without market research. This gives an expected monetary value of £ 18,000.