Answered: Figure 1: Price/Gallon The Market for…

Figure 1: Price/Gallon The Market for Gasoline $17 $16 $15 $14 $13 $12 $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 0 1 5 6 7 8 Gallons en O

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 3QR

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Concept explainers

Risk and Uncertainty

Uncertainty refers to a situation when there is one possible outcome of a decision but where the probability of occurrence of each particular outcome is not known or cannot be estimated.

Question

‘Lottery A’ refers to a lottery ticket that pays $2,000 with a probability of 0.3, $8,000 with a probability of 0.4, $12,000 with a probability of 0.2, and $18,000 with a probability of 0.1.
What is the expected value of Lottery A?
A) $7200
B) $8000
C) $9000
D) $7900
E) None of the above

Figure 1:
Price/Gallon
The Market for Gasoline
$17
$16
$15
$14
$13
$12
$11
$10
$9
$8
$7
$6
$5
$4
$3
$2
$1
0
1
5
6
7
8
Gallons
en
O

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