In using the expected value criterion suppose that there are three possible outcomes (states of nature).If the probability of outcome1 is 0.4 and the probability of outcome 2 is 0.5,then what is the probability of outcome 3?
A)P(outcome 3)= 0.1
B)P(outcome 3)cannot be determined
C)P(outcome 3)= 1.0
D)P(outcome 3)

Question

In using the expected value criterion suppose that there are three possible outcomes (states of nature).If the probability of outcome1 is 0.4 and the probability of outcome 2 is 0.5,then what is the probability of outcome 3?
A)P(outcome 3)= 0.1
B)P(outcome 3)cannot be determined
C)P(outcome 3)= 1.0
D)P(outcome 3)< 0

Quizplus · Accepted Answer

The sum of the probabilities of all possible outcomes should add up to 1. Therefore, 
0.4 + 0.5 + P(outcome 3) = 1 
0.9 + P(outcome 3) = 1 
P(outcome 3) = 1 - 0.9 
P(outcome 3) = 0.1 
Thus, the correct choice is A.

In Using the Expected Value Criterion Suppose That There Are