Question 181541: an architect is considering bidding for the design of a new theater. the cost of drawing plans and submitting a model is $15,000. the probability fo being awarded the bid is 0.2, and the anticipated probfits are $80,000, resulting in a possible gain of teh amount minus the $15,000 cost for the plans adn models. what is the expected value if the architect decides to bid for the design? Descrbe what this value means.
Answer by Mathtut(3670)   (Show Source):
You can put this solution on YOUR website! let X be the possible payouts
:
E(X)=((P(c)* X(c))+(P(~c)* X(~c))=(.2(65000)+.8(-15000))=1000
:
now since expected value is the average of all possible outcomes, adjusted (or “weighted”) for the likelihood that each outcome will occur, then
1000 dollars represents the average of possible outcomes(adjusted)for the likely hood of each outcome.
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