Question

A state lottery is holding a million dollar raffle and each ticket has the following odds of being a winner:Which of the following choices best represents the price where tickets would start costing too much to play and expect to make money over the long run?$7.50$8.50$8.00$8.25$7.75ОО

Answer 1

EXPLANATION

We are told that the payoff for the raffle is one million dollars and we know that each ticket has the following chances of being a winner:

1:125,000

The probability is given by the following relationship:

$P=\frac{\text{event:particular phenomenon we want to observe}}{\text{sample space: total number of possible outcomes }}$

We need to use the expected means formula and substitute the x variable for the given payoff for the lottery ticket.

$E(x)=x_1\cdot p_1$

Replacing terms:

$E(x)=1,000,000\cdot\frac{1}{125,000}$

Simplifying:

$E(x)=\frac{1,000,000}{125,000}=8$

The expected payoff is 8 dollars. If