If a person is entertained by gambling, then A) she is not ...

[bobthebuilder]

If a person is entertained by gambling, then
 
  A) she is not risk averse.
  B) she does not understand the concept of a fair game.
  C) she may gamble even if it is an unfair game.
  D) she will definitely not buy automobile insurance.

Question 2

Sarah buys little stuffed animals for 5 each. They come in different varieties. If the producer stops making (retires) a certain variety, a stuffed animal of that variety will be worth 100; otherwise it is worth 0. There is 25 chance that any variety will be retired. For the purchase of an individual animal, what is the value to Sarah of knowing ahead of time whether or not that variety will be retired?
 
  What will be an ideal response?

[akpaschal]

Answer to Question 1

C

Answer to Question 2

If Sarah did not know whether a variety is to be retired, her expected value of a purchase is (.75  -5 ) + (.25  95 ) = -3.75 + 23.75 = 20.
If she knows ahead of time that a variety won't be retired, she won't buy one. So, her expected value becomes (.75  0 ) + (.25  95 ) = 23.75.
The information that a variety will or will not be retired is worth 3.75 to her.