Discuss the below:
Q: An oil company purchased an option on land in Oklahoma. Preliminary studies assigned the follwing prior probabilities.
P(high-quality oil) = .50
P(medium-quality oil) = .20
P(no oil) = .30
a. What is the probablility of finding oil?
b. After 200 feet of drilling on the first well, a soil test is made. The probabilities of finding the particular type of soil identified by the test are:
P(soil/high-quality oil) = .20
P(soil/medium-quality oil) = .80
P(soil/no oil) = .20
a. How should the firm interpret the soil test?
b. What are the revised probabilities, & what is the new probability of finding oil?