New Car. A game show gives away 2 new cars. One car is worth $50,000 and the other car is worth $40,000. Two members of the audience are randomly selected to participate and receive one of the two new cars. What is the expeted value if you are randomly chosen and you had to pay $4 to be a member of the audience with 1999 other people.

Question

drwls · Answer

Your chances are 1/2000 of winning the $50,000 car (if it is drawn first) plus 1/1999 of drawing the second car. Expected value of the opportunity to participate is $45. If you paid $4 for that opportunity, it was a good deal.

Anonymous · Answer

Thanks