If she feels there is a 30% chance that demand will be high, what is her expected payoff under certainty?
A)$1,600
B)$1,100
C)$1,000
D)$900
E)$500

Question

Quizplus · Accepted Answer

The expected payoff under certainty is calculated by multiplying the probability of each outcome by its payoff and summing these products. If the payoff for high demand is $1,600 and the probability is 30%, then the expected payoff is 0.3 * $1,600 = $480. However, since the question asks for the payoff under certainty (assuming high demand occurs), the payoff is directly $1,600.

If She Feels There Is a 30% Chance That Demand