Use the following to answer questions:
-(Table: Income and Utility for Whitney) Look at the table Income and Utility for Whitney. Whitney's income next year is uncertain: there is a 40% probability she will make $40,000 and a 60% probability she will make $80,000. The expected value of Whitney's income is:
A) $64,000.
B) $80,000.
C) $40,000.
D) $56,000.

Question

Use the following to answer questions: 
-(Table: Income and Utility for Whitney) Look at the table Income and Utility for Whitney. Whitney's income next year is uncertain: there is a 40% probability she will make $40,000 and a 60% probability she will make $80,000. The expected value of Whitney's income is:
A) $64,000. 
B) $80,000. 
C) $40,000. 
D) $56,000.

Quizplus · Accepted Answer

The expected value is calculated by multiplying each outcome by its probability and summing the results: (0.4 * $40,000) + (0.6 * $80,000) = $16,000 + $48,000 = $64,000.

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