Question: An oil company purchased an option on land in Alaska. Preliminary geologic studies assigned the following prior probabilities.
a. What is the probability of finding oil?
b. After 200 feet of drilling on the first well, a soil test is taken. The probabilities of find-ing the particular type of soil identified by the test follow.
How should the firm interpret the soil test? What are the revised probabilities. and what is the new probability of finding oil?