Suppose Jack and Kate are at the town fair and are choosing which game to play. The first game has a bag with four marbles in it-1 red marble and 3 blue ones. The player draws one marble from the bag; if it is red, they win $20 and if it is blue, they win $1. The second game has a bag with 10 marbles in it-1 red, 4 blue, and 5 green. The player draws one marble from the bag; if it is red, they win $20; if it is blue, they win $5; and if it is green, they win $1. Both games cost $5 to play. Assume Jack will play the games that have a higher expected payoff than the cost of playing the game. Comparing the expected value of the payoff of each game to the price of $5 to play, we can conclude that Jack should_____________.

Respuesta :

Answer:

Jack should play the first game as it has a net expected value of $0.75 greater than the cost to play

Explanation:

First game probability : four marbles = 1 ; red marble = 1/4 =0.25, blue marbles 3/4 = 0.75

second game probability : 10 marbles =1 ; red marbles =1/10 =0.1, blue marbles= 4/10=0.4 , green marble = 5/10 =0.5

                                             revenue       probability      expected value

First game :

 -Red marbles                     $20                   0.25                  $5

 - Blue marbles                   $1                       0.75                 $0.75

Total expected value                                                                        $5.75

costs to play                                                                                     -$5

Net value                                                                                            $0.75

Second game:

 -Red marbles                    $20                     0.1                  $2

 -blue marble                     $5                       0.4                  $2

 - Green marble                 $1                        0.5                  $0.5

Total expected value                                                                      $4.5

Costs to play                                                                                    -$5

Net value                                                                                           -$0.5