Question

a)If Paul is risk-loving and his basketball team has a probability of .6 of winning, then Paul would rather bet $10 on his team than $1000. (When Paul bets X, he wins X if his team wins and loses X if his team loses) True or False.

Answer 1

FALSE. If he is risk-loving, he will rather bet $1,000 rather than $10.

Explanation:

FALSE.

As Paul is risk-loving, he will take more risk, even if there is no more chances of winning if he bets $10 or $1,000. He will focus on the probability of winnings rather than the expected losses.

In this case, the probabilities are the same independently of the amount that Paul bets.