In Order to Illustrate the Basic Economic and Psychological Dynamics

question 25

Multiple Choice

In order to illustrate the basic economic and psychological dynamics involved in purchasing life insurance,one can create a very simple game with a sack,one black marble,and three white marbles.In this game,the four marbles are placed in the sack,and the player must pay a "premium" of $5 for each draw he makes from the sack.The previously-drawn marbles are not returned to the sack so,if he keeps playing,the player is guaranteed to win the $12 award eventually (but at what cost?!) .Use a simulation to predict the average cost to win the $12 assuming the player continues playing until he gets the black marble.Use 30 simulation runs,letting a random number give the number of draws to obtain the black marble on a particular run.

• A)About $20.50
• B)About $12.50
• C)About $5.00
• D)About $17.00
• E)About $15.50

---

Definitions:

Coefficient

A coefficient is a numerical or constant quantity placed before and multiplying the variable in an algebraic expression (e.g., 4 in 4x).

Binomial

A polynomial with exactly two terms.

\(x^6\)

A mathematical expression representing a variable, x, raised to the power of 6.

\(y^8\)

Represents y raised to the power of eight, a mathematical expression indicating repeated multiplication of y by itself 7 more times.