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1. Suppose that your state have a lottery (clearly it is not Nevada because Nevada does

not have


a state lottery). If you buy a ticket you will win with probability 0.1. If you win you will get $500


but if you lose, you get zero. How much should you pay to buy a ticket in this lottery?


a) $500


b) $5


c) $50


d) It does not make sense to play this lottery no matter what the price of a ticket is.

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