6.11 Profit and the weather From past experience, a wheat farmer living in Manitoba, Canada, finds that
Question:
6.11 Profit and the weather From past experience, a wheat farmer living in Manitoba, Canada, finds that his annual profit (in Canadian dollars) is $80,000 if the summer weather is typical, $50,000 if the weather is unusually dry, and $20,000 if there is a severe storm that destroys much of his crop. Weather bureau records indicate that the probability is 0.70 of typical weather, 0.20 of unusually dry weather, and 0.10 of a severe storm. Let X denote the farmer’s profit next year.
a. Construct a table with the probability distribution of X.
b. What is the probability that the profit is $50,000 or less?
c. Find the mean of the probability distribution of X.
Interpret.
d. Suppose the farmer buys insurance for $3000 that pays him $20,000 in the event of a severe storm that destroys much of the crop and pays nothing otherwise.
Find the probability distribution of his profit.
Find the mean and summarize the effect of buying this insurance.
Step by Step Answer:
Statistics The Art And Science Of Learning From Data
ISBN: 9781292164878
4th Global Edition
Authors: Alan Agresti, Christine A. Franklin, Bernhard Klingenberg