Question

question 15
a contractor is considering a sale that promises a profit of $24,000 with a probability of.7 or a loss (due to bad weather, strikes, and such) of $1,000 with a probability of.3. what is the expected profit?
a $16,500
b $23,000
c $16,800
d $17,500
4 points

Explanation:

Step1: Calculate the expected profit from the positive outcome

The profit from the positive outcome is $24000$ with a probability of $0.7$. So the contribution to the expected profit is $24000\times0.7$.
$$24000\times0.7 = 16800$$

Step2: Calculate the expected profit from the negative outcome

The loss (negative profit) from the negative outcome is $1000$ with a probability of $0.3$. So the contribution to the expected profit is $(- 1000)\times0.3$.
$$(-1000)\times0.3=-300$$

Step3: Sum the two contributions

Add the results from Step1 and Step2 to get the expected profit.
$$16800+( - 300)=16500$$

Answer:

A. $16,500$