In Order to Attract Listeners, a Radio Station Gives Away

question 63

Essay

In order to attract listeners, a radio station gives away money if listeners correctly identify the amount of money found by a "treasure hunter". A contestant would guess the amount on the air, and the disc jockey would then play a tape in which the "treasure hunter" said how much he had found. If the caller guessed correctly, they won the amount of money found by the treasure hunter. If they guessed incorrectly, they received nothing. Suppose that the treasure hunter either found $50 or $100. The payoff matrix represents this game: $$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\text { Treasure Hunter Finds: } \\\begin{array} { l r r c } & & \$ 50 & \$ 100 \\\hline \text { Caller Guesses } & \$ 50 & \$ 50 & \$ 0 \\& \$ 100 & \$ 0 & \$ 100\end{array}$$
If the station plans on running the game every day for 10 days, how much will they pay out?

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Definitions:

Marginal Cost

The additional expenditure involved in producing one additional unit of a good or service.

Product X

A placeholder name typically used in economics and marketing to represent a generic product under consideration.

Resource Allocation

The process of assigning and distributing available resources to various uses in an economy, often in order to maximize efficiency or achieve a desired outcome.

Production Possibilities Curve

A graph that shows the maximum number of possible units a company can produce if it only produces two types of goods given a fixed amount of resources.