Question

Suppose that the manager of a company has estimated the probability of a super-event sometime during the next five years that will disrupt all suppliers as 0.0023. In addition, the firm currently uses three suppliers for its main component, and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next five years to be 0.014. What is the approximate probability that all three suppliers will be disrupted at the same time at some point during the next five years?a.0.0012b.0.0140 c.0.0023 d.0.0090

Answer 1

Given Information:

Probability of super event = P(S) = 0.0023

Number of suppliers = n = 3

Probability of unique event = P(U) = 0.014

Required Information:

Probability that all three suppliers will be disrupted = ?

Answer:

P(3) = 0.0023

Explanation:

We want to find out the approximate probability that all three suppliers will be disrupted at the same time at some point during the next five years.

The required probability is given by

P(n) = P(S) + (1 - P(S))*P(U)ⁿ

Where P(S) is the probability of super event that will disrupt all suppliers, P(U) is the probability of unique event that would disrupt one of the suppliers and n is the number of suppliers.

P(3) = 0.0023 + (1 - 0.0023)*(0.014)³

P(3) = 0.0023 + (0.9977)*(0.014)³

P(3) = 0.0023

The correct option is C = 0.0023

Therefore, there is 0.23% probability that all three suppliers will be disrupted at the same time at some point during the next five years.