Using Scenario 2 suppose Bill has eliminated one of the answers ...

[Diane]

Using Scenario 2 suppose Bill has eliminated one of the answers but is unsure of which of the remaining four answers are correct. Determine whether it is rational for Bill to guess.
 
  What will be an ideal response?

Question 2

Refer to Table 2-5. If the two countries specialize and trade, who should export lumber?
 
  A) They should both be exporting lumber.
  B) Finland
  C) There is no basis for trade between the two countries.
  D) Estonia

[Zack0mack0101@yahoo.com]

Answer to Question 1

What we need to do is to compute the expected value of guessing and compare it to the expected value of leaving the question unanswered. The expected value of guessing if he has eliminated one answer is  (9) +  (-5) = 9/4  15/4 = -6/4 = -3/2 or -1.5 . Since this is less than the expected utility of skipping the question with a value of zero Bill should elect not to answer the question.

Answer to Question 2

D

[Diane]

YES! Correct, THANKS for helping me on my review

[mcarey591]

Gracias!