A Game Involving a Pair of Dice Pays You $4

question 3

Multiple Choice

A game involving a pair of dice pays you $4 with probability 16/36, costs you $2 with probability 14/36, and costs you $6 with probability 6/36.
What is your expected net result, in dollars, per play?

• A) -$8
• B) -$1.78
• C) $0
• D) $1.78
• E) $8

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Definitions:

Total Cost Method

An accounting approach that aggregates all costs associated with the production of goods or services to determine their overall expense.

Variable Cost

A cost that changes in proportion to the level of production or sales volume.

Differential Analysis

This analysis involves comparing the costs and benefits of alternative business decisions, focusing on the differences in outcomes under each option.

Excess Capacity

The available production capability that exceeds the current demand for products or services.