20. Decision Analysis: An oil company is considering drilling at two different sites. However, it can only afford to commit its resources to one site. It is estimated that site A will net $35 million if successful (probability .25) and lose $3 million if not successful. Site B will net $48 million if successful (probability .2) and lose $4 million if not successful. What is the expected return from each site? Which site should the oil company choose?

20. Decision Analysis: An oil company is considering drilling at two different sites. However, it can only afford to commit its resources to one site. It is estimated that site A will net $35 million if successful (probability .25) and lose $3 million if not successful. Site B will net $48 million if successful (probability .2) and lose $4 million if not successful. What is the expected return from each site? Which site should the oil company choose?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 8MC

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