Which of the following best explains the idea of the expected value of the consequences of a risky action?
A) The unweighted average of the value of each possible outcome, counting each outcome as equally likely.
B) The weighted average of the value of each possible outcome, where each value is weighted by the probability of the outcome occurring.
C) The value of the outcome that is most likely to occur, based on objective probabilities.
D) The average of the value of the outcome that you expect to occur.

Question

Quizplus · Accepted Answer

The expected value of the consequences of a risky action is calculated as the weighted average of the value of each possible outcome, where the weights are the probabilities of each outcome occurring. This accounts for the likelihood of each outcome, making it a more accurate measure than simply averaging the outcomes or selecting the most likely outcome.

Which of the Following Best Explains the Idea of the Expected