Consider the Following Scenario When Answering the Following Questions

question 131

Multiple Choice

Consider the following scenario when answering the following questions:
Imagine a game show on television where one lucky contestant is presented with four upside-down buckets that are numbered 1,2,3,and 4.Under one of the buckets is exactly one $100 bill.Under each of the other three buckets is exactly one $5 bill.After the game ends,the contestant will receive the amount of money that is under his or her bucket.
The host of the game show asks the contestant to choose one of the four buckets.After the contestant makes a choice,the host lifts up two of the remaining three buckets to reveal a $5 bill under each of them.At this point,only two buckets remain uncovered: the bucket that the contestant originally chose and the bucket that was not uncovered by the host.
The host subsequently asks the contestant if he or she would like to keep the original bucket or change buckets to the only other bucket remaining.
-If the contestant does not change buckets and stays with the original bucket,what is the expected value of the game?

• A) $5.00
• B) $95.00
• C) $62.50
• D) $28.75
• E) $76.25

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Definitions:

Monetary Policy

The process by which a central bank controls the money supply, aiming at specific economic targets such as controlling inflation, stimulating economic growth, and reducing unemployment.

Classical Economics

A school of thought in economics that emphasizes the idea that free markets can regulate themselves through the laws of supply and demand.

Government Intervention

Actions taken by government to influence or regulate economic activity, often to achieve economic or social objectives.

Budget Deficits

The situation where a government's expenditures surpass its revenues within a specified period, leading to a shortfall that requires borrowing.