A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed: What is the expected monetary value of buying the ticket?
A) +$1.00
B) -$0.998
C) +$0.998
D) -$1.998

Question

A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed:  What is the expected monetary value of buying the ticket?
A) +$1.00 
B) -$0.998 
C) +$0.998 
D) -$1.998

Quizplus · Accepted Answer

The Answer of A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed:  What is the expected monetary value of buying the ticket?
A) +$1.00 
B) -$0.998 
C) +$0.998 
D) -$1.998

A Person Is Trying to Decide If They Should Buy