Decision-Making and Expected Value

The video tutorial explains how to incorporate probabilities into decision-making problems to calculate expected values for different countries. It demonstrates the process of evaluating costs to determine the least expensive option and introduces the concept of the expected value of perfect information, which helps in understanding the maximum amount one would pay for perfect information. The tutorial provides a step-by-step guide to solving these calculations, emphasizing the importance of probabilities and cost evaluation in decision-making.

What is the main purpose of adding probabilities to decision-making problems?

• To ensure all outcomes are equally likely

• To eliminate uncertainty

• To calculate the expected value for each decision

• To increase the complexity of the problem

What must the sum of probabilities for all states of nature equal?

• 0.5

• 1

• 2

• 0

Which country had the highest expected cost in the calculations?

• China

• South Korea

• Taiwan

• Mexico

What is the expected value for South Korea based on the given probabilities?

• 18.71 million

• 19.73 million

• 17.07 million

• 18.38 million

Which country was determined to have the least cost option?

• China

• Poland

• Taiwan

• South Korea

What is the expected value of perfect information?

• The value of the best decision without any information

• The value of the best decision with perfect information

• The cost of obtaining perfect information

• The difference between the best and worst decisions

Which country is chosen if the economy is expected to decline?

• South Korea

• China

• Taiwan

• Mexico

What is the expected value of perfect information calculated in the video?

• 12.5 million

• 19 million

• 17.07 million

• 16.17 million

How much would you save by using perfect information according to the video?

• 0.9 million

• 1.7 million

• 2.3 million

• 0.5 million

What is the maximum amount you would pay for perfect information?

• 1.5 million

• 1 million

• 900 thousand

• 500 thousand