Question 360605
In a lottery game, one can win $10,000 with probability 0.01 and $1000 with probability 0.05. How much should one pay for a lottery ticket to make the game fair? 
<pre>
We calculate the expectation:

Winnings   Probability   Winning×probability
$10000        0.01            $100
 $1000        0.05             $50
                         -------------------
            Expectation =     $150

So on the average if someone entered this same lottery free many times, 
they would expect to average winning $150 per time they entered.

So for the game to be fair, one would have to expect $0, and thus one
should pay $150 per ticket.

Edwin</pre>