Asked by Michael Ariestan on May 10, 2024
Verified
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
Charge
The amount of money that is asked in exchange for goods or services.
- Determine and implement the fundamentals of probability to calculate anticipated outcomes within financial settings.
- Implement the principle of expected value in practical situations like fairground contests and decisions in software engineering.
Verified Answer
SA
Student: Abed YassineMay 11, 2024
Final Answer :
B
Explanation :
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.
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.
Learning Objectives
- Determine and implement the fundamentals of probability to calculate anticipated outcomes within financial settings.
- Implement the principle of expected value in practical situations like fairground contests and decisions in software engineering.
Related questions
At a Fair Carnival Roulette Wheel,a Player Can Either Win ...
If the Firm Can Only Afford Developing One of the ...
At a Fair Carnival Roulette Wheel,a Player Can Either Win ...
What Is the Expected Revenue from Developing the Simplified Software
What Is the Expected Revenue from Developing the Complicated Software