Suppose a person can play the lottery for $1.00. His chance of winning $25 million is 1 in 50 million. If there are no other costs or benefits involved, the logic of cost/benefit analysis says:
A) he should play the lottery.
B) he should not play the lottery.
C) he should play only if he does not have a self-control problem with gambling.
D) there is not enough information to decide whether he should play.

Question

Quizplus · Accepted Answer

The expected value of playing the lottery is negative because the cost ($1) outweighs the probability-adjusted benefit (0.5) of winning $25 million (1/50,000,000 * $25,000,000 = $0.50).

Suppose a Person Can Play the Lottery for $1