A firm is contemplating the purchase of 500 printer cartridges. One supplier, supplier A, offers the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A firm is contemplating the purchase of 500 printer cartridges. One supplier, supplier A, offers the cartridges at $15 each, guarantees each cartridge, and will replace all defective cartridges free. A second supplier, supplier B, offers the cartridges at $14 each with no guarantee. How- ever, supplier B will replace defective cartridges with good cartridges for $10 per cartridge. Sup- pose that the proportion of defective cartridges produced by supplier B is denoted by p, and suppose that the prior distribution for is a beta distribution with parameters r'= 2 and n' = 50. (a) What should the firm do on the basis of the prior distribution? (b) How much is it worth to the firm to know the proportion of defective cartridges for certain? (c) Suppose that supplier B can provide a randomly chosen sample of 10 cartridges. What is the expected value of this sample? (d) In the sample of 10 cartridges, 1 is defective. Find the posterior distribution of p and use this distribution to determine which supplier the firm should deal with. %3D %3D l no A firm is contemplating the purchase of 500 printer cartridges. One supplier, supplier A, offers the cartridges at $15 each, guarantees each cartridge, and will replace all defective cartridges free. A second supplier, supplier B, offers the cartridges at $14 each with no guarantee. How- ever, supplier B will replace defective cartridges with good cartridges for $10 per cartridge. Sup- pose that the proportion of defective cartridges produced by supplier B is denoted by p, and suppose that the prior distribution for is a beta distribution with parameters r'= 2 and n' = 50. (a) What should the firm do on the basis of the prior distribution? (b) How much is it worth to the firm to know the proportion of defective cartridges for certain? (c) Suppose that supplier B can provide a randomly chosen sample of 10 cartridges. What is the expected value of this sample? (d) In the sample of 10 cartridges, 1 is defective. Find the posterior distribution of p and use this distribution to determine which supplier the firm should deal with. %3D %3D l no
Expert Answer:
Answer rating: 100% (QA)
a The firm should do nothing on the basis of the prior distribution Since p is a beta distribution w... View the full answer
Related Book For
Making Hard Decisions with decision tools
ISBN: 978-0538797573
3rd edition
Authors: Robert Clemen, Terence Reilly
Posted Date:
Students also viewed these accounting questions
-
A firm is contemplating the purchase of new automated plant costing $240,000 to replace a n existing machine that can be sold for $ 110 ,000 today . The existing machine (which can continue to be...
-
A consumer is contemplating the purchase of a new smart phone. A consumer magazine reports data on the major brands. Brand A has lifetime (TA), which is exponentially distributed with m = 0.2; and...
-
The manager of Global X is contemplating the purchase of a new machine that will cost $300,000 and has a useful life of five years. The machine is expected to yield cost reductions to Global X of...
-
The Litzenberger Company has projected the following quarterly sales amounts for the coming year: a. Accounts receivable at the beginning of the year are $310. Litzenberger has a 45-day collection...
-
True or False? A census offers the most accurate accounting of the characteristics of the target population.
-
Shafer Office Supplies has four distribution centers, located in Atlanta, Lexington, Milwaukee, and Salt Lake City, and ships to 12 retail stores, located in Seattle, San Francisco, Las Vegas,...
-
Describe the objectives of tort law.
-
Intermountain Resources is a multidivisional company. It has three divisions with the following betas and proportion of the firms total assets: The risk-free rate is 7 percent and the market risk...
-
2 Is it possible to factor 1 - sin x two different ways? If so, show and explain. If not, why not?
-
Kate Collins has opened Fontina and Stuff, a wholesale grocery and cheese company. The following transactions occurred in February: Required 1. Journalize the transactions. Beginning balances of...
-
What are the 5 things that we can learn from this video: https://www.youtube.com/watch?v=_mglyRI99eQ
-
Which of the following statements are positive in nature and which are normative? a. A tax cut will raise interest rates. b. A reduction in the payroll tax would primarily benefit poor and...
-
Prove Theorem 1.13 using induction. That is, assume that \[E_{1}(x, \delta)=\int_{x}^{x+\delta}(x+\delta-t) f^{\prime \prime}(t) d t\] which has been shown to be true, and that \[E_{p}(x,...
-
Prove that if \(f\) is a polynomial of degree \(p\) then \[f(x+\delta)=\sum_{i=1}^{p} \frac{\delta^{i} f^{(i)}}{i !}\]
-
Suppose that \(f\) is a cubic polynomial. Prove that for \(\delta \in \mathbb{R}\), \[f(x+\delta)=f(x)+\delta f^{\prime}(x)+\frac{1}{2} \delta^{2} f^{\prime \prime}(x)+\frac{1}{6} \delta^{3}...
-
Suppose that \(f\) is a quadratic polynomial. Prove that for \(\delta \in \mathbb{R}\), \[f(x+\delta)=f(x)+\delta f^{\prime}(x)+\frac{1}{2} \delta^{2} f^{\prime \prime}(x) .\]
-
Suppose that an analyst has estimated a = 1.0 % and b= 1.10 On a day where there is good news, US GDP numbers came in very strong, which causes the market goes up by 1.0%. What is the expected return...
-
Briefly describe the following types of group life insurance plans: a. Group term life insurance b. Group accidental death and dismemberment insurance (AD&D) c. Group universal life insurance d....
-
In bottle production, bubbles that appear in the glass are considered defects. Any bottle that has more than two bubbles is classified as nonconforming and is sent to recycling. Suppose that a...
-
In what quadrant of the grid in Figure 6.2 would you place the following tasks? a. Selecting an investment for the funds in your retirement account b. Creating an organizational chart for merging two...
-
Repeat Problem 14.24 with U (x) = 0.0003 x 8.48e x = 2775. A utility function of this form is called linear-plus-exponential, because it contains both linear (0.0003 x) and exponential terms. It...
-
When facilitating the methylation or pseudouridylation of an rRNA, a snoRNA functions as a. a decoy. b. a scaffold. c. a guide. d. both b and c.
-
When an ncRNA functions as a decoy, it a. contains binding sites for many different proteins, thereby promoting the formation of a large complex. b. recognizes other ncRNAs and sequesters them,...
-
Suppose that the overexpression of a particular miRNA was associated with pancreatic cancer. Which of the following agents might be effective in treating this type of cancer? a. Enoxacin b. A DNA...
Study smarter with the SolutionInn App