hristaker is considering transitioning to a new job next year. He will either keep his current job which pays a net income of $77,000 or switch to a new job. If he changes jobs, his net income will vary depending on the state of the economy. He estimates that the economy will beStrongwith 30% chance ($85,000 net income),Averagewith 50% chance ($73,000 net income), orWeakwith 20% chance ($59,000 net income).

Part A

1. What is the best expected value for Christaker and the corresponding decision using the Expected Monetary Value approach? $Correct

Select an answer

Keep current job

Change job

Correct

2. What is the expected value of perfect information (EVPI)?

$Correct

Part B

Christaker can hire Sandeep, a mathematical economist, to provide information regarding the state of the economy next year. Sandeep will either predict aGoodorBadeconomy, with probabilities 0.55 and 0.45 respectively. If Sandeep predicts aGoodeconomy, there is a 0.42 chance of aStrongeconomy, and a 0.52 chance of anAverageeconomy. If Sandeep's prediction isBad, then the economy has a 0.36 chance of beingWeakand 0.58 chance of beingAverage.

1. If Sandeep predicts Good economy, what is the expected value of the optimal decision? $Incorrect

2. If Sandeep predicts Bad economy, what is the expected value of the optimal decision? $

3. What is the expected value with the sample information (EVwSI) provided by Sandeep? $

4. What is the expected value of the sample information (EVSI) provided by Sandeep? $

5. If cost of hiring Sandeep is $55, what is the best course of action for Christaker?Select an answer

Hire Sandeep; cost is less than EVSI

Don't hire Sandeep; cost is greater than EVSI

Hire Sandeep; cost is greater than EVSI

Don't hire Sandeep; cost is less than EVSI

Correct

6. What is the efficiency of the sample information? Round % to 1 decimal place.