Help me quick please
2 answers:
You might be interested in
Answer:
(a) $12,000. It is reasonable since profit is positive
(b) $6,000
Step-by-step explanation:
(a) The promoter's expected profit is given by the product of his potential earnings by the probability that it does not rain, minus the product of his potential losses by the probability of rain:
The promoter's expected profit is $12,000, it is a reasonable criterion since profit is positive.
(b) An insurance company should charge the product of the full potential losses by the probability of rain:
An insurance company should charge $6,000.