Suppose Jack and Kate Are at the Town Fair and Are

Multiple Choice

Suppose Jack and Kate are at the town fair and are choosing which game to play. The first game has a bag with four marbles in it-1 red marble and 3 blue ones. The player draws one marble from the bag; if it is red, $20 is won, and if it is blue, $1 is won. The second game has a bag with 10 marbles in it-1 red, 4 blue, and 5 green. The player draws one marble from the bag; $20 is won if it is red, $5 is won if it is blue, and $1 is won if it is green. Both games cost $5 to play.If Kate only cares about the expected value of the outcome and does not care about risk, she should:

A) not play the first game, because she never wins anything.
B) play the first game only if the cost of playing is greater than the expected value of the payoff.
C) compare the cost of playing the first game with the value of her time.
D) play the first game only if the cost of playing is less than the expected value of the payoff.