5. Suppose Amy is playing the following lottery game. There is an urn containing 30 balls: 10 are red, and the remaining 20 are some combination of blue and green balls (possibly all blue, all green, or any combination in between). Amy is choosing between possible bets on the color of a ball drawn randomly from the urn. If she wins her bet, she gets $100, otherwise she gets $0. a. Amy is given the choice to bet on red or to bet on green. She strictly prefers to bet on red. Assuming that Amy has some subjective probability p in her mind that the ball will be green, what does Amy's choice imply about p? b. Suppose instead Amy is given the choice to bet that the ball will not be red, or to bet that the ball will not be green. She strictly prefers to bet that the ball will not be red. Assuming that Amy has some subjective probability 1-p in her mind that the ball will not be green, what does Amy's choice imply about 1-p? c. Can the conditions found in parts (a) and (b) be true at the same time? Explain your answer.

A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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5. Suppose Amy is playing the following lottery game. There is an urn containing 30 balls: 10 are red, and the
remaining 20 are some combination of blue and green balls (possibly all blue, all green, or any combination in
between). Amy is choosing between possible bets on the color of a ball drawn randomly from the urn. If she
wins her bet, she gets $100, otherwise she gets $0.
a. Amy is given the choice to bet on red or to bet on green. She strictly prefers to bet on red. Assuming
that Amy has some subjective probability p in her mind that the ball will be green, what does Amy's
choice imply about p?
b. Suppose instead Amy is given the choice to bet that the ball will not be red, or to bet that the ball will
not be green. She strictly prefers to bet that the ball will not be red. Assuming that Amy has some
subjective probability 1-p in her mind that the ball will not be green, what does Amy's choice imply
about 1-p?
c. Can the conditions found in parts (a) and (b) be true at the same time? Explain your answer.
Transcribed Image Text:5. Suppose Amy is playing the following lottery game. There is an urn containing 30 balls: 10 are red, and the remaining 20 are some combination of blue and green balls (possibly all blue, all green, or any combination in between). Amy is choosing between possible bets on the color of a ball drawn randomly from the urn. If she wins her bet, she gets $100, otherwise she gets $0. a. Amy is given the choice to bet on red or to bet on green. She strictly prefers to bet on red. Assuming that Amy has some subjective probability p in her mind that the ball will be green, what does Amy's choice imply about p? b. Suppose instead Amy is given the choice to bet that the ball will not be red, or to bet that the ball will not be green. She strictly prefers to bet that the ball will not be red. Assuming that Amy has some subjective probability 1-p in her mind that the ball will not be green, what does Amy's choice imply about 1-p? c. Can the conditions found in parts (a) and (b) be true at the same time? Explain your answer.
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