Question 601459: Imagine that you are a participant in a game show, where "free" money is given away. There are 4 prizes hidden on a game board with 16 spaces. One prize is worth $4000, another is worth $1500, and two are worth $1000 each.
If you select one of the prize spaces, you will get the related prize. However, if you select any of the other spaces, you will have to pay $50, as penalty for not making the ‘wise’ choice
In this game show, you are actually given a choice:
• Choice #1: You are offered a sure prize of $400 in cash. You can take the money and leave.
• Choice #2: Take your chance and play the game.
What would be your choice? Take the money and run, or play the game? Please explain your decision.
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Imagine that you are a participant in a game show, where "free" money is given away. There are 4 prizes hidden on a game board with 16 spaces. One prize is worth $4000, another is worth $1500, and two are worth $1000 each.
If you select one of the prize spaces, you will get the related prize. However, if you select any of the other spaces, you will have to pay $50, as penalty for not making the ‘wise’ choice
In this game show, you are actually given a choice:
• Choice #1: You are offered a sure prize of $400 in cash. You can take the money and leave.
• Choice #2: Take your chance and play the game.
What would be your choice? Take the money and run, or play the game? Please explain your decision.
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Random "winning" values: 5000,1500,1000,1000
Corresponding probabilities are all 4/16 = 1/4
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Expected "Winnings": (5000 + 1500 + 1000 + 1000 - 50*12)/16 = $493.75
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Since the expected winnings is not that much better than $400,
take the $400 and quit the game.
Cheers,
Stan H.
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