Question: Please explain why the answer is B for the below question. Consider the following payoff table. States of Nature Alternatives A B Alternative 1 100

Please explain why the answer is B for the below question.

Consider the following payoff table.

States of Nature

Alternatives A B

Alternative 1 100 150

Alternative 2 200 100

Probability 0.4 0.6

How much should be paid for a perfect forecast of the state of nature?

(a) 170

(b) 30

(c) 10

(d) 100

(e) none of the above

ANSWER: b

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