Many people purchase these types of lottery games

Assignment Help Business Economics

Reference no: EM13887819

In order to boost funding for the state of Florida or Mississippi, depending on where you are, each state has decided to start a daily drawing where people can purchase a ticket for $1 with a 3-digit number from 000-999. If the number on the ticket matches the number drawn, the person wins $500. Suppose a person is risk neutral, i.e., their utility is linear in income. In this case U=Y. Show that a risk neutral person will never purchase a lottery ticket. Why then do so many people purchase these types of lottery games? (Hint: what is the Expected outcome from the gamble?)

Reference no: EM13887819

Questions Cloud

Decreasing or uncertain effect on the level of average cost : Indicate whether each of the following involves an upward or downward shift in the long run average cost curve or, instead, involves a leftward or rightward movement along a given curve. Also indicate whether each will have an increasing, decreasing,..

Remains a lender even after a decline in interest rates : Suppose you wanted to study intertemporal food purchases. You have annual data on food purchases. Would it be valid to assume that food in one year and food in another year are perfect substitutes? Why or why not? A consumer, who is initially a lende..

Breach of contract-which the lawyers term highly improbably : Your firm has been sued for $3 million by a supplier for breach of contract. Your lawyers believe that there are three possible outcomes if the suit goes to trial. One, which the lawyers term “highly improbably,” is that your supplier will win the la..

Many people purchase these types of lottery games : In order to boost funding for the state of Florida or Mississippi, depending on where you are, each state has decided to start a daily drawing where people can purchase a ticket for $1 with a 3-digit number from 000-999. Why then do so many people pu..

Religions prohibit-encourage consumption of certain plants : Does the natural environment play any role (or any significant role) in the development of religious beliefs? Explain providing some examples. Why do some religions prohibit or encourage the consumption of certain plants and/or animals? For example, ..

Equal to the slope of the price consumption curve : A? person's income is ?$300?, the price of a video is ?$55?, and the price of deluxe pizza is ?$15. At?equilibrium, the marginal rate of substitution is equal to the slope of the price consumption curve. the consumer is buying three times more videos..

Discovered that can be produced at constant marginal cost : A new chemical has been discovered that can be produced at a constant marginal cost of $10 by its patent holder, Johnson inc. Two industries, A and B, find the chemical, Cloreen, to be useful in their production processes.

Old taxpayer-reports the items of income and expense : During 2015, Kent, a 40-year-old taxpayer, reports the following items of income and expense: Assuming all of these items are deductible and that the amounts are before any limitations, what is Kent's taxable income for the year?

User Account

All Pages