Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 11 - Counting Methods and Probability Theory - Chapter Summary, Review, and Test - Review Exercises - Page 762: 109

Answer

See below.

Work Step by Step

By definition, the expected value is the sum of each outcome multiplied by its probability. Hence here the expected value: $\frac{1}{4}\cdot(30000-3000)+\frac{3}{4}\cdot(-3000)=4500$. This means that in the long run they are expected to win $4500$ on average per bid on similar bids.
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