What is the expected value of a $100 bet on a flip of a fair coin, where heads pays double and tails pays zero?
What will be an ideal response?
The expected value of this event is calculated as E.V. = PH (H) + PT (T); where H is the payoff from the coin turning up heads and T is the payoff if the coin turns up tails. PH and PT are the probabilities of the coin turning up heads or tails respectively. Substituting actual values in out formula reveals: E.V. = 0.5 ($200) + 0.5($0) = $100
You might also like to view...
In the principal-agent problem, the agent is:
A. a person who entrusts someone with a task. B. a person who carries out a task on someone else's behalf. C. a person who is in charge of a top-secret mission. D. a person who has the same objectives as the principal.
What does each point on the production possibilities curve represent? (check all that apply)
a. Inefficiency in production b. Efficiency in production c. The maximum output of two products d. The maximum output of many products
Refer to the above table. What is the marginal utility for the 10th unit for Hillary and for Bill?
A. Hillary: 10; Bill 10 B. Hillary: 220; Bill 450 C. Hillary: -10; Bill: 10 D. Hillary: 0; Bill: 0
The statement that "as more of a good is consumed, its extra benefit declines" refers to
A. the law of diminishing marginal product. B. the law of diminishing marginal utility. C. the law of demand. D. the law of comparative advantage.