Question

the florida lottery has done extensive research on the individuals who purchase their products. they have determined that their customers have a square root utility function and an initial wealth of $100. it costs $19 to purchase a lottery ticket and each ticket has a 50/50 chance of being worth $39. true or false, customers will purchase these lottery tickets.

Answer 1

Risk is the potential of gaining or losing something of value. Values (such as physical health, social status, emotional well-being or financial wealth) can be gained or lost when taking risk resulting from a given action or inaction, foreseen or unforeseen. Risk can also be defined as the intentional interaction with uncertainty.Uncertainty is a potential, unpredictable, and uncontrollable outcome; risk is a consequence of action taken in spite of uncertainty.

Risk perception is the subjective judgment people make about the severity and probability of a risk, and may vary person to person. Any human endeavor carries some risk, but some are much riskier than others.