Which of the Following Chances Has the Biggest Expected Return

question 181

Multiple Choice

Which of the following chances has the biggest expected return?

• A) a 100% chance of getting $1,000
• B) a 50% chance of winning $2,000 and a 50% chance of winning $0
• C) a 50% chance of winning $2,000, 25% chance of winning $4,000 and a 25% chance of losing $4,000
• D) All of the above have the same expected return.

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Definitions:

Opportunity Cost

The value of the best alternative forgone when a decision is made.

Burritos

A Mexican dish consisting of a wheat flour tortilla wrapped or folded around a filling, often including beans, rice, meat, and vegetables.

Bagels

Doughnut-shaped bread rolls that are boiled before being baked, often topped with seeds or filled with various ingredients.

Marginal Analysis

Analysis of the added value an activity provides compared to its additional expenses.