Asked by Regina Andres on May 10, 2024
Verified
Refer to Table 5.4. If outcomes 1 and 2 are equally likely at Job A, and if at Job B the $20 outcome occurs with probability .1, and the $50 outcome occurs with probability .9, then:
A) Job A is safer because the difference in the probabilities is lower.
B) Job A is riskier only because the expected value is lower.
C) Job A is riskier because the standard deviation is higher.
D) Job B is riskier because the difference in the probabilities is higher.
E) There is no definite way given this information to tell how risky the two jobs are.
Standard Deviation
A statistical measure of the dispersion or variation in a set of values, indicating how spread out the values are from the mean.
- Understand the concept of risk and its quantification in economic decision-making.
- Acquire knowledge on the technique to compute standard deviation for risk assessment.
Verified Answer
PL
Phuong Le Thanh_ K14 FUG CTMay 11, 2024
Final Answer :
C
Explanation :
Job A is considered riskier because the standard deviation, which measures the spread or variability of outcomes, is higher when outcomes are equally likely compared to Job B, where one outcome is much more likely than the other.
Learning Objectives
- Understand the concept of risk and its quantification in economic decision-making.
- Acquire knowledge on the technique to compute standard deviation for risk assessment.