Question: A Bayesian approach can be used to revise to probabilities that a prospect field will produce oil. In one case, geological assessment indicates a 25% chance that a field will produce oil. Further, there is an 80% chance that a particular well will produce oil given that oil is present in the prospect field.
A. Suppose that one well is drilled on the field and it comes up dry. What is the probability that the prospect field will produce oil?
B. If two well comes up dry, what is the probability that the field will produce oil?
C. The oil company would like to keep drilling as long as the chances of finding oil are greater than 1% How many wells must be drilled before the field will be abandoned?