Question: I need a help to solve this question ? Which of the options is right and why? Suppose that over the next several years, there
I need a help to solve this question ? Which of the options is right and why?
Suppose that over the next several years, there will be 100 cardiac incidents at Frontier Gym.Without a defibrillator, 30 victims will die before paramedics arrive. With a defibrillator, there is an 80% probability of saving a victim who would die without it.However, there is a 3% probability that improper use of the defibrillator will kill a victim who would have otherwise lived. Find the expected number of lives saved by the defibrillator.
option 1.
1-0.04=0.96 (probability of winning)
1,000,000 * 96% = 960,000 (savings)
960,000-2500=957,500 (the expected value of owing the defibrillator)
Option 2.
Expectedcost of defibrillator to Frontier gym = $2,500 + $40,000
Expected cost of defibrillator to Frontier gym = $42,500
Option 3Expected value = 0.96*(-2,500) + 0.04*(1,000,000) = -2,400 + 40,000 =$37,600
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