Question

Derrick only wants to play the game if he can expect to win money over many turns. Should Derrick play, and for what reason?

Answer 1

C) Yes, because on average, Derrick can expect to come out ahead by $0.10 per turn.

Explanation:

Derrick's expected payoff per turn is the sum of products of the payoff amount and the probability of occurrence.

expected payoff = $5.00 × 0.32 + $0.00 × 0.68 = $1.60

Derrick must pay $1.50 per turn, so his payoff of $1.60 per turn means he will come out ahead, on average, by $0.10 per turn.