Question
In the oil-wildcatting problem, suppose that the company could collect information from a drilling core sample and analyze it to determine whether a dome structure
In the oil-wildcatting problem, suppose that the company could collect information from a drilling core sample and analyze it to determine whether a dome structure exists at Site 1. A positive result would indicate the presence of a dome, and a negative result would indicate the absence of a dome. The test is not perfect, however. The test is highly accurate for detecting a dome; if there is a dome, the test shows a positive result 99% of the time. On the other hand, if there is no dome, the probability of a negative result is only 0.85. Thus, P(+ 1 Dome) 0.99 and P(-1 No Dome) = 0.85. Use these probabilities, the information given in the example, and Baye's theorem to find the posterior probabilities P(Dome 1 +) and P(Dome 1 -). If the test Rives a positive result, which site should be selected? Calculate expected values to support your conclusion. If the test result is negative, which site should be chosen?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started