Alice decides to play the lottery.She has a 5% probability of winning $100 and a 95% probability of winning zero.The expected value of her decision to play is

Question

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To calculate the expected value of Alice's decision to play, we take the sum of the products of the probabilities of each outcome and the corresponding payoff. 
Expected value = (0.05 * 100) + (0.95 * 0) = 5
This means that on average, if Alice played this lottery game many times, she would expect to win $5 per game. Therefore, the best choice for Alice would be to not play the lottery, as she is not likely to receive a significant payoff.

Alice Decides to Play the Lottery