QUESTION 8

Scenario 1:

Aline and Sarah decide to go into business together as economic consultants. Aline believes they have a 5050 chance of earning $200,000 a year, and that if they don't, they'll earn $0. Sarah believes they have a 75% chance of earning $100,000 and a 25% chance of earning $10,000.

Refer to Scenario 1. The expected value of the undertaking,

Part 2

A.

according to Aline, is $100,000.

B.

according to Sarah, is $75,000.

C.

according to Sarah, is $110,000.

D.

according to Sarah, is $100,000.

E.

according to Aline, is $200,000.