Consider the following scenario when answering the following questions:
Ivett and Desiree are considering playing a game called Twenties versus Fifties.In this game,Ivett will place a $20 bill on the table,and Desiree will place a $50 bill on the table.Both players will then toss a fair coin.If both Ivett and Desiree toss heads or if they both toss tails,Ivett wins the $70 on the table.If one woman tosses heads and the other tosses tails,Desiree wins the $70 on the table.
-For Ivett to be willing to play this game,Ivett would need to be ________.For Desiree to be willing to play this game,Desiree would need to be ________.
A) risk averse; risk averse
B) risk averse; risk neutral
C) risk neutral; a risk taker
D) a risk taker; risk neutral
E) a risk taker; risk averse

Question

Quizplus · Accepted Answer

In this game, the expected value for each player is $35. Since the game is fair, a risk-neutral player would be willing to play. On the other hand, a risk-averse player would require a higher expected value or a lower probability of losing money to be willing to play. Therefore, Ivett, who is only risking $20, would need a higher expected value to be willing to play, making her risk-averse. Desiree, who is risking $50, would need a lower probability of losing money or a higher expected value to be willing to play, making her a risk taker. Therefore, option C is the correct answer.

Consider the Following Scenario When Answering the Following Questions