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 second game because she never wins anything.
B) play the second game because she will always win some amount of money.
C) not play the second game because the cost of playing the game is greater than the expected value of the payoff.
D) play the second game because the cost of playing the game is less than the expected value of the payoff.