IEOR 166
Professor S. Oren
April 10, 2006
MIDTERM II
(50 Minutes)
Closed Book
Calculators allowed
Two double sided note sheet 8.5” x 11” allowed
Bill, an expected value decision maker, needs your help. His little dog, Puppy is showing symptoms of a
very potent and lethal virus. Bill currently believes that there is a .2 probability that Puppy is infected.
Fortunately, there is a treatment against the virus that works 100% of the time with no side effects.
However, the treatment costs $500.
On the other hand if Puppy has the virus and is not treated he will die
for sure and Bill estimates his emotional cost and the cost of replacing Puppy at a total of $2000 (assume
that if Puppy goes untreated and turns out not to have the virus then the cost is $0).
Bill’s objective is to
minimize his expected total cost.
Two blood tests are available to determine if Puppy is infected. The two tests are conditionally independent
given the infection state (i.e. if the virus is present or not):
•
TEST A which costs $X and can only tell if the virus is present. i.e., if Puppy is infected then the test
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '08
 Oren
 Probability theory, Puppy

Click to edit the document details