Question 3) A nuclear power company is deciding whether or not to build a nuclear power plant at Diablo Canyon or at Roy Rogers City. The cost of building the power plant is $10 million at Diablo and $20 million at Roy Rogers City. If the company builds at Diablo, however, and an

earthquake occurs at Diablo during the next five years, construction will be terminated and the company will lose $10 million (and will still have to build a power plant at Roy Rogers City). A priori, the company believes there is a 20% chance that an earthquake will occur at Diablo during the next five years. For $1 million, a geologist can be hired to analyze the fault structure at Diablo Canyon. He will either predict that an earthquake will occur or that an earthquake will not occur. The geologists past record indicates that he will predict an earthquake on 95% of the occasions for which an earthquake will occur and no earthquake on 90% of the occasions for which an earthquake will not occur. What should the nuclear power company do if a geologist is hired?

Question 3) A nuclear power company is deciding whether or not to build a nuclear power plant at Diablo Canyon or at Roy Rogers City. The cost of building the power plant is $10 million at Diablo and \$20 million at Roy Rogers City. If the company builds at Diablo, however, and an earthquake occurs at Diablo during the next five years, construction will be terminated and the company will lose $10 million (and will still have to build a power plant at Roy Rogers City). A priori, the company believes there is a 20% chance that an earthquake will occur at Diablo during the next five years. For $1 million, a geologist can be hired to analyze the fault structure at Diablo Canyon. He will either predict that an earthquake will occur or that an earthquake will not occur. The geologist's past record indicates that he will predict an earthquake on 95% of the occasions for which an earthquake will occur and no earthquake on 90% of the occasions for which an earthquake will not occur. What should the nuclear power company do if a geologist is hired