In a certain state lottery, a lottery ticket costs $1. In terms of the decision to...

In a certain state lottery, a lottery ticket costs $1. In terms of the decision to purchase or not to purchase a lottery ticket, suppose that the following payoff table applies:

	State of Nature
	Win	Lose
Decision Alternatives	s₁	s₂
Purchase Lottery Ticket, d₁	600000	-1
Do Not Purchase Lottery Ticket, d₂	0	0

A realistic estimate of the chances of winning is 1 in 260,000. Use the expected value approach to recommend a decision. If required, round your answer to two decimal places. If the amount is zero enter “0”.

Recommended decision: Purchase Lottery Ticket

Expected Value = $
If a particular decision maker assigns an indifference probability of 0.00001 to the $0 payoff. Would this individual purchase a lottery ticket?

Decision: Yes, Purchase Lottery Ticket

Use expected utility to justify your answer. If required, round your answer to five decimal places.

Expected Utility =

The input in the box below will not be graded, but may be reviewed and considered by your instructor.

Expert Solution

milcah answered 1 year ago

1) You buy a lottery ticket to a lottery that costs $10 per ticket. There are...

1) You buy a lottery ticket to a lottery that costs $10 per ticket. There are only 100 tickets available to be sold in this lottery. In this lottery there are one $500 prize, two $100 prizes, and four $25 prizes. Show its probability distribution in the form of a table. What is the standard deviation of your gain or loss? What type of skewness does the probability distribution represent?

The odds of winning a certain lottery with a single ticket is 1 in 300,000,000. In...

The odds of winning a certain lottery with a single ticket is 1 in 300,000,000. In May and June, 200,000,000 tickets were bought. 1. Please assume the tickets win or lose independently of each other and give the exact probability that there was no winner during the two months. 2. Only using a basic scientific calculator, give an approximation to the same question from part 1. Explain why this approximation is a good one.

On a recent trip to the united States, you purchased a ticket in a state lottery....

On a recent trip to the united States, you purchased a ticket in a state lottery. Now you discover that you are the lucky winner of the $30 million prize. You can take your prize money either as (a) 30 payments of $1 million per year (starting today), or (b) $15 million paid today. If the interest rate is 8%, which option should you take. Show calculations 2. James has just turned 35 years old, and he has decided it...

The probability of winning in a certain state lottery is said to be about 1/9. If...

The probability of winning in a certain state lottery is said to be about 1/9. If it is exactly 1/9, what a random variable represents the distribution of the number of tickets a person must purchase up to and including the first winning ticket? Plot the PMF of this random variable. the distribution of the number of tickets purchased up to and including the second winning ticket can be described by what distribution?

A lottery ticket is given. For this lottery, five integer numbers are chosen from 1 to...

A lottery ticket is given. For this lottery, five integer numbers are chosen from 1 to 50, and the order doesn’t matter. You win the main prize of one million dollars if your ticket matches all five numbers drawn; you win a second prize of one thousand dollars if your ticket matches exactly four of the five numbers drawn; and otherwise you win nothing. a. What’s the probability that you win the main prize? b. What’s the probability that you...

The payoff X of a lottery ticket in the Tri-State Pick 3 game is $500 with...

The payoff X of a lottery ticket in the Tri-State Pick 3 game is $500 with probability 1/1000 and $0 the rest of the time. Assume the payoffs X and Y are for separate days and are independent from each other. a. What price should Tri-State charge for a lottery ticket so that they can break even in the long run (average profit =$ 0). b. Find the mean and standard deviation of the total payoff X+Y.

In the lottery of a certain state, players pick six different integers between 1 and 49,...

In the lottery of a certain state, players pick six different integers between 1 and 49, the order of the selection being irrelevant. The lottery commission then selects six of these numbers at random as the winning numbers. A player wins the grand prize of $1,200,000 if all six numbers that he has selected match the winning numbers. He wins the second and third prizes of $800 and $35 respectively, if exactly five and four of his six selected numbers...

What is the expected value of a lottery ticket where there are only 1 chance in...

What is the expected value of a lottery ticket where there are only 1 chance in 10 millions of winning the grand prize of $50 Million, and 100,000 in 10 millions chances of winning $100? The area under the normal curve between z = -1 and z = -2 is _______than the area under the normal curve between z = 2 and z = 3 A.equal to B.less than C.greater than D.A, B, or C above depending on the value...

Prob Set 1 Lottery question 3 3. You just won $250,000 on a lottery ticket. You...

Prob Set 1 Lottery question 3 3. You just won $250,000 on a lottery ticket. You plan to save the money in a retirement account expected to return 8% per year. If you intend to retire in 20 years, how much are these winnings expected to be worth when you retire? a) Suppose you win the lottery but are given the following choice: 1) receive $250,000 today in a lump sum or 2) receive annual payments of $20,000 for...

A lottery game is played in many places and requires $1 per ticket to play. To...

A lottery game is played in many places and requires $1 per ticket to play. To win the jackpot, a person must correctly pick five unique numbers from balls numbered 1 through 36 (order does not matter) and correctly pick a final number, which is chosen from balls numbered 1 through 26. What is the probability of winning the jackpot?

Question