Bundle: Managerial Economics, 4th + Mindtap Economics, 1 Term (6 Months) Access Code
Bundle: Managerial Economics, 4th + Mindtap Economics, 1 Term (6 Months) Access Code
4th Edition
ISBN: 9781305618572
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
Question
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Chapter 17, Problem 1MC
To determine

The expected value of guessing.

Expert Solution & Answer
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Explanation of Solution

The expected value of guessing (EG) can be calculated as follows:

EG=(OptionCorrectOptionTotal×AwardCorrect)+(OptionIn correctOptionTotal×AwardIn correct)=(15×1)+(45×(0.25))=0

The expected value of guessing is 0. Thus, option ‘d’ is correct.

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