Answer to Question #50827 in Microeconomics for asif

Question

A city government is trying to decide whether it should have celebration for its one-hundredth anniversary. The financial success of the project will be strongly dependent on the weather. The alternatives available to the city government are (1) have large celebration (2) have small celebration (3) have no celebration. The payoff matrix of this decision is as under

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0.5 0.2 0.3
S1 S2 S3
Sun Cloudy Rain
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D1 Large celebration 350,000 80,000 150,000

Answer 1

If the alternatives available to the city government are (1) have large celebration (2) have small celebration (3) have no celebration, the
payoff matrix of this decision is as under S1 (sun) = 0.5, S2 (cloudy) =
0.2, S3 (rain) = 0.3, and possible earnings of large celebration are
350,000, 80,000 and 150,000, the risk-weighted amount of revenue will
be: TR = 350,000*0.5 + 80,000*0.2 + 150,000*0.3 = 236,000.