John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. If John decides to expand based on expected value, it means that:
A. the sum of expected earnings from expanding and from not must exceed $150,000.
B. his expected earnings from expansion must exceed $150,000.
C. the difference in expected earnings from expanding versus not must exceed $150,000.
D. the difference in expected earnings from expanding versus not must not exceed $150,000.
Answer: C
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