# Question: an oil company purchased an option on land in alaska...

###### Question details

An oil company purchased an option on land in Alaska. Preliminary geologic studies assigned the following prior probabilities.

P(high quality oil) |
= 0.50 |

P(medium quality oil) |
= 0.20 |

P(no oil) |
= 0.30 |

- What is the probability of finding oil? If required, round your answer to two decimal places.
- 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)= 0.20 *P*(soil | medium quality oil)= 0.80 *P*(soil | no oil)= 0.20

How should the firm interpret the soil test? - What are the revised probabilities, and what is the new probability of finding oil? If required, round your answer to two decimal places.