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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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
Transcribed Image Text:When playing roulette at a casino, a gambler is trying to decide whether to bet $10 on the number 30 or to bet $10 that the outcome is any one of the three possibilities 00, 0, or 1.
3
The gambler knows that the expected value of the $10 bet for a single number is - 53¢. For the $10 bet that the outcome is 00, 0, or 1, there is a probability of 38 of making a net
profit of $30 and a probability of losing $10.
35
38
a. Find the expected value for the $10 bet that the outcome is 00, 0, or 1.
b. Which bet is better: a $10 bet on the number 30 or a $10 bet that the outcome is any one of the numbers 00, 0, or 1? Why?
a. The expected value is $.
(Round to the nearest cent as needed.)
b. Since the expected value of the bet on the number 30 is
C
than the expected value for the bet that the outcome is 00, 0, or 1, the bet on
is better.
Expert Solution
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Given
The probability for net profit of 30 is 3/38
The probability for lossing of 10 is 35/38
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