Alternatives 1 and 2 in the following payoff table represent the two possible
manufacturing strategies that the EKA manufacturing company can adopt. The level of
demand affects the success of both strategies. The states of nature (SI) represent the
levels of demand for the company products. S1, S2, and S3 characterize high, medium,
and low demand, respectively. The payoff values are in thousands of dollars.
Determine the best alternative (course of action) for the EKA manufacturing company
using the maximin criterion.
A pharmaceutical company manufacturing flu test kits wants to determine the
probability of a teenager not having the flu when the test results indicate that they do. It
is estimated that the probability of positive test for flu among potential users of the kit
is 10 percent. According to the company laboratory test results, 1 out of 100
noninfected teenagers tested as having the flu (false positive). On the other hand, 1 out
of 200 teenagers with the flu tested as not having the active virus (false negative). A
teenager has just used the flu test kit manufactured by the company and the results
showed she does not have the flu. What is the probability that she has the flu?