Explain what is wrong and why it is wrong: 1. You bought 10 lottery tickets. One

Question

Explain what is wrong and why it is wrong:

1. You bought 10 lottery tickets. One of them won a prize. That means that the probability of winning a prize is 1/10.

2. In a lottery, buying more tickets does not affect your chances of winning a prize.

3. John has 3 suits, 10 shirts, and 12 neckties. He will need to buy some more clothes if he wants to come to work each work day in a different outfit for a whole year.

4. If in a probability distribution you get the sum of probabilities less than one, it just means that you have a smaller-than-normal distribution

5. From the perspective of the insurance company, health insurance policies are set up in such a way that a healthy person has a negative expected value, and a sickly person has a positive one.

Explanation / Answer

1) False, let say that there are n lottery tickets in total. Then, the probability of winning a prize is 10/n 2) False, because each ticket bought has the same chance of winning a prize 4) False, the sum of probabilities in any distribution has to equal to one. 5) False, a healthy person must also have a positive expected value, but this expected value should be less than the expected value of a sickly person (because in general healthy person have less claims, and their claims are relatively smaller).

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