At a fair carnival roulette wheel,a player can either win $10,$30,or $80.Assuming a rational player,how much should the game owner charge the player,to maximize his own profit?
A)$30
B)$40
C)$50
D)$80

Question

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.Assuming a rational player,how much should the game owner charge the player,to maximize his own profit?
A)​$30
B)$40
C)$50
D)​$80

Quizplus · Accepted Answer

To maximize the profit, the game owner needs to charge an amount that is higher than the expected value of the winning. The expected value of the winning is:
10/3 + 30/3 + 80/3 = $40
Therefore, the game owner should charge an amount higher than $40, which eliminates options A and D. Option C is too high and would likely deter rational players from playing the game altogether. Therefore, option B, which is slightly higher than the expected value of the winnings, would be the best choice for the game owner to maximize their profit.

​At a Fair Carnival Roulette Wheel,a Player Can Either Win

At a Fair Carnival Roulette Wheel,a Player Can Either Win