Answer to Question #98748 in Economics of Enterprise for marivic

Question

The bubble tea cafe wants to use advertisements in order to increase sales. They currently choosing between two advertising media : magazine ads and a youtube ad. The expected profit, in millions, is summarized in the two tables below
profit probability
30 0.05
40 0.20
50 0.50
60 0.20
70 0.05
compute for the expected value each probability in each decision

Answer 1

The expected value from the table above is:

EV = 30*0.05 + 40*0.20 + 50*0.50 + 60*0.20 + 70*0.05 = 50.