Provide an appropriate response.
-Suppose you buy 1 ticket for $1 out of a lottery of 1,000 tickets where the prize for the one winning ticket is to be $500. What is your expected value?
A) -$1.00
B) $0.00
C) -$0.50
D) -$0.40

Question

Quizplus · Accepted Answer

The expected value can be calculated by multiplying the probability of winning by the amount won and subtracting the cost of the ticket. The probability of winning is 1/1,000 and the amount won is $500, so (1/1,000)($500) = $0.50. Subtracting the cost of the ticket, the expected value is -$0.50, which means on average, you can expect to lose $0.50 for every ticket you buy. Therefore, the best choice is not to buy the ticket at all.

Provide an Appropriate Response