Week 9 Assignment.docx - Kevin Villanes Grand Canyon University ECN-601 February 5 2019 Week 9 Assignment Chapter 17 o Problem 17-2 If the contestant is

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Kevin Villanes Grand Canyon University: ECN-601 February 5, 2019 Week 9 Assignment Chapter 17 o Problem 17-2 If the contestant is 50% correct, then the probability of winning the two million dollars is 0.5. There is a 50% chance the winning will double from a million to two million dollars. The other 50% chance will be that they are incorrect, where the price will decrease to half a million. The expected payoff is calculated below. ¿ ( 0.5 ) ( 1,000,000 ) + ( 0.5 ) ( 500,000 ) ¿ 500,000 250,000 ¿ \$ 250,000 Thus, the value being positive, the contestant should play the game. For the lowest probability, where the decision to play is profitable is calculated below. ¿ 1,000,000 + ( 1 e ) × ( 500,000 ) ¿ 1,500,000e-500,000 500,000 = 1,500,000 e e≥ 500,000 1,500,000 e≥ 1 3 In conclusion, the lowest probability of correct guessing will be equal to or greater than 0.333, where it will be profitable. o Problem 17-6 There are two types of errors that result in this scenario: Type I Error: The candidate is fit for the job, but is rejected. Type II Error: The candidate is not fit for the job, but is selected.

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Kevin Villanes Grand Canyon University: ECN-601 February 5, 2019 Type II error will discovered by the CEO, as an individual in this type of position
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