Consider the Following Compound Lotteries: First a Coin Is Flipped$54 \%$

Question

Examlex · Accepted Answer

The Answer is A.Cancellation means we ignore the coin flip at the beginning and simply compare Lottery A and Lottery B. Next, simplification means Lottery A becomes

50 \%

chance of

\$ 100

and Lottery B becomes

25 \%

of

\$ 200

.
B.Combination means we take the compound lottery into account, so lottery A becomes

\frac{1}{2} * .54=27 \%

chance of winning

\$ 99

and Lottery B becomes

\frac{1}{2} * 24 \%=

12 \%

chance of winning

\$ 199

. Simplification means we round the probabilities and the outcomes, so lottery A becomes

25 \%

chance of winning

\$ 100

and lottery B becomes a

10 \%

chance of winning

\$ 200

.

Consider the Following Compound Lotteries: First a Coin Is Flipped $54 \%$

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Correct Answer:
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Consider the Following Compound Lotteries: First a Coin Is Flipped 54%54 \%54%

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Consider the Following Compound Lotteries: First a Coin Is Flipped $54 \%$

Correct Answer:
Verified