Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 7

A service station owner sells Goodroad tires, which are ordered from a local tire distributor. The distributor receives tires from two plants, A and B. When the owner of the service station receives an order from the distributor, there is a.50 probability that the order consists of tires from plant A or plant B. However, the distributor will not tell the owner which plant the tires come from. The owner knows that 20% of all tires produced at plant A are defective, whereas only 10% of the tires produced at plant B are defective. When an order arrives at the station, the owner is allowed to inspect it briefly. The owner takes this opportunity to inspect one tire to see if it is defective. If the owner believes the tire came from plant A, the order will be sent back. Using Bayes' rule, determine the posterior probability that a tire is from plant A, given that the owner finds that it is defective.