Alex, Who Is Risk-Neutral, Is Looking for a One-Bedroom Apartment

question 35

Multiple Choice

Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. If the cost to Alex of searching for an apartment is $40, then searching for another apartment is a gamble with an expected value of:

• A)-$10.
• B)$0.
• C)$10.
• D)$20.

---

Definitions:

Trend

A general direction in which something is developing or changing, observed in data over time.

Annual Time-series

A sequence of data points representing the value of a variable over a series of years.

Sequential Order

The arrangement of objects, events, or values in a specific sequence where the order is significant.

Dependent Variable

The variable in an experiment that is observed and measured to see how it is affected by the independent variable.