A Grocery Chain Runs a Prize Game by Giving Each

question 9

Multiple Choice

A grocery chain runs a prize game by giving each customer a ticket that may win a prize when a box is scratched. Printed on the ticket are the following probabilities for a customer who shops once a week:

What is the expected value of a customer's winnings in this game?

• A) $22.00
• B) $10.00
• C) $370.00
• D) $0.31
• E) $100

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Definitions:

Pareto Optimal

A state of allocation of resources from which it is impossible to make any individual better off without making at least one individual worse off.

Utility Function

An economic model that describes how consumers rank different bundles of goods based on the levels of happiness or satisfaction they provide.

Initial Endowment

The initial set of assets, financial resources, or goods that an individual, institution, or economy possesses.

Utility Function

A mathematical representation that describes how consumers rank different bundles of goods according to the levels of satisfaction or utility those bundles provide.