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    Probability Concepts and the Standard Normal Distribution

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    Hi, I need some assistance with the following two questions. I am not sure that I understand the questions fully. Any assistance would be appreciated.

    1. What are some conditions under which business decisions are made using probability concepts? Provide at least two examples of subjective probability.
    2. What are the characteristics of Standard Normal Distribution. Explain with examples. Your response should be around 250 words in length.

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    Solution Preview

    Hi, I hope that this helps!

    1. Probability theory is used extensively in business. For example, suppose you are planning an outdoor promotion that costs $100,000 and will generate a $30,000 profit. However, there is a 20% chance of rain that day. Should you go ahead with the promotion or cancel due to the chance of rain?

    To solve this problem, we do a probability analysis. If it does rain, you will lose $100,000 and if it does not, you will earn $30,000. Thus, your expected profit is (0.2)(-$100,000) + (0.8)($30,000) = -$20,000 + $24,000 = +$4,000. Thus it is worthwhile not to cancel the ...

    Solution Summary

    We give two examples of how probability theory can be used in business and describe basic properties of the normal distribution. Response includes over 400 words.