1. State whether the following is a classical or Bayesian (subjective) probability, and explain why (1...

1. State whether the following is a classical or Bayesian (subjective) probability, and explain why (1 pt for correct id and 1 pt for explanation):

a. The chance of getting a 5 on a fair 6-sided die is 1/6.

b. The chance that the replacement bill for the ACA will be passed by Congress before the end of the year is 5%.

c. There is a 95% chance of a major correction (drop of 20% or more) in the stock market in the next 6 months.

d. The chance a baby will be born male is 51%.

e. If you flip a fair coin many times, about 50% of the time you will have gotten heads.

Solutions

Expert Solution

(a) Classical probability

Explanation: It is equally probable that the top face of die will be any of the 6 numbers on the die: 1,2,3,4,5 or 6.

(b) Bayesian (subjective) probability:

Explanation: The chance that the replacement bill for the ACA will be passed by Congress before the end of the year is 5% is the probability based on prior knowledge of conditions that might be related to the events: here: the replacement bill for the ACA will be passed by Congress before the end of the year

Explanation: There is a 95% chance of a major correction (drop of 20% or more) in the stock market in the next 6 months is the probability based on prior knowledge of conditions that might be related to the events: here: a major correction (drop of 20% or more) in the stock market in the next 6 months.

(d) Bayesian (subjective) probability:

Explanation: The chance a baby will be born male is 51% is the probability based on prior knowledge of conditions that might be related to the events: here: a baby will be born male.

(e) Classical probability

Explanation: It is equally probable that the top face of a fair coin will be any one of the two mutually exclusive and completely exhaustive events: Head and Tail.

orchestra answered 1 year ago

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