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Answer the next 3 questions based on the following information: a decision maker facing two choices: Choice 1: receive a sure payoff of $1000 Choice
Answer the next 3 questions based on the following information: a decision maker facing two choices: Choice 1: receive a sure payoff of $1000 Choice 2: Flip a coin, if heads she received $2000, if tails, she receives nothing 21. The expected payoff of choice 2 is a) 0 b) 1000 c) 2000 d) 4000 22. Which of the following statement is true? a) payoff for choice 1 is greater than payoff of choice 2 b) Risk of choice 2 is less that risk of choice 1 c) in the long run, choice 2 payoff will be zero d) The variance in choice 1 is zero 23. The variance of choice 2 is a) 0 b) 2000 c) 2500000 d) 1000000 e) None of the above
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