A Person Is Trying to Decide If They Should Buy

question 25

Multiple Choice

A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature) , the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed: What is the expected monetary value of buying the ticket?

• A) +$1.00
• B) -$0.998
• C) +$0.998
• D) -$1.998

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Definitions:

Amphibian

A cold-blooded vertebrate animal that is born in water and breathes with gills, but develops lungs and lives on land as an adult.

Blood Pressure

The force exerted by circulating blood on the walls of blood vessels, typically measured in the arteries.

Circulatory System

The body system consisting of the heart, blood, and blood vessels, responsible for transporting oxygen, nutrients, and other substances throughout the body.

Returns

In a financial context, the profit or loss derived from an investment over a specified period of time, often expressed as a percentage of the investment's initial cost.