1. In the final round of a TV game show, contestants have a chance to increase their current winnings of $ 1 million dollars to 2 million dollars. If they are wrong, their prize is decreased to $500,000. A contestant thinks his guess will be right 50% of the time. Should he play? What is the lowest probability of a correct guess that would make playing profitable?
2. The HR Dept. is trying to fill a vacant position for a job with a small talent pool. Valid applications arrive every week or so and applicants all seem to bring different levels of expertise. For each applicant, the HR manager gathers in information by trying to verify various claims on resumes, but some doubt about fit always lingers when a decisions to hire a not is not to be made. What are the Type 1 and Type 2 decision error cost? Which decision error is more likely to be discovered by the CEO and How does this affect the HR managers hiring decision?