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The cost-minimizing decision threshold

A monitoring system reads a value XX. Under background (H0H_0), XNormal(0,1)X \sim \text{Normal}(0, 1) with prior probability π0=0.9\pi_0 = 0.9. Under an anomaly (H1H_1), XNormal(4,1)X \sim \text{Normal}(4, 1) with prior probability π1=0.1\pi_1 = 0.1. A false alarm (declaring an anomaly when there is none) costs 11 unit; a missed anomaly costs 2727 units. You will declare "anomaly" whenever X>cX > c.

Find the cutoff cc that minimizes the expected cost.

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