A Person Is Trying to Decide If They Should Buy

question 90

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: Based on the expected monetary value of buying a ticket, what is the best decision?

• A) Buy
• B) Don't buy
• C) Lose
• D) Win

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Definitions:

Indigestion

A general term for discomfort in the upper abdomen, including symptoms such as bloating, heartburn, and nausea, often following meals.

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The natural process by which the vagina produces a fluid to reduce friction during sexual activity.