Given that this is , you play the final round of the game. (Hint: Enter a negative sign if the expected payoff is negative.) The lowest probability of a correct guess that would make the guessing in the final round profitable (in expected value) is . (Hint: At what probability does playing the final round yield an expected value of zero?)
Given that this is , you play the final round of the game. (Hint: Enter a negative sign if the expected payoff is negative.) The lowest probability of a correct guess that would make the guessing in the final round profitable (in expected value) is . (Hint: At what probability does playing the final round yield an expected value of zero?)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1 . Individual Problems 17-2
You're a contestant on a TV game show. In the final round of the game, if contestants answer a question correctly, they will increase their current winnings of $3 million to $4 million. If they are wrong, their prize is decreased to $2,250,000. You believe you have a 25% chance of answering the question correctly.
Ignoring your current winnings, your expected payoff from playing the final round of the game show is
. Given that this is , you play the final round of the game. (Hint: Enter a negative sign if the expected payoff is negative.)
The lowest probability of a correct guess that would make the guessing in the final round profitable (in expected value) is . (Hint: At what probability does playing the final round yield an expected value of zero?)
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