Mel is thinking of going on a cruise.Mel values a cruise in nice weather at $2,000 and values a cruise in bad weather at $50.According to a very reliable source,the probability of nice weather is 60% and the probability of bad weather is 40%.Trip insurance is sometimes available.If purchased,it allows travelers to delay the cruise until the weather is nice.
If a gamble has an expected value of $10,then one can predict that

Question

Quizplus · Accepted Answer

Risk-neutral persons make decisions based on expected value alone. If the expected value of a gamble is $10, a risk-neutral person would take the gamble because they are indifferent to risk and focus on the expected monetary outcome.

Mel Is Thinking of Going on a Cruise