Alice Decides to Play the Lottery

question 137

Multiple Choice

Alice decides to play the lottery.She has a 5% probability of winning $100 and a 95% probability of winning zero.The expected value of her decision to play is

• A) $100.
• B) $5.
• C) $10.
• D) $50.

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Definitions:

Optimal Area

The most advantageous or efficient region or point for a specific activity or condition.

Public Good

A non-excludable and non-rivalrous good that can be consumed by everyone, such as national defense or public parks.

Nonexclusive

A term usually related to goods or services, indicating that they cannot be withheld from individuals who don't pay for them.

Marginal Social Cost

The total cost to society, including both private and external costs, of producing one additional unit of a good or service.