Question

A contractor is considering a sale that promises a profit of ​$35 comma 000 with a probability of 0.7 or a loss​ (due to bad​ weather, strikes, and​ such) of ​$18 comma 000 with a probability of 0.3. What is the expected​ profit?

Answer 1

Answer:

$19,100

Step-by-step explanation:

The expected profit would be the probability of profit multiplied by the profit and the sum of probability of loss multiiplied by the loss.

So, we can say:

E(p) = P(p)*P + P(L)*L

Where

E(p) is expected profit

P(p) is probabilty of profit (0.7)

P is the profit (35,000)

P(L) is probability of loss (0.3)

L is the loss (-18,000)

Substituting these values, we get:

E(p) = P(p)*P + P(L)*L

E(p) = (0.7)(35,000) + (0.3)(-18,000)

E(p) = 19,100

The expected profit is $19,100