A \"psychic\" runs the following ad in a magazine. \"Expecting a baby? Renowned

Question

A "psychic" runs the following ad in a magazine. "Expecting a baby? Renowned psychic will tell you the sex of the unborn child from any photograph of the mother. Cost, $25. Money-back guarantee." This may be a profitable con game. Suppose that the psychic simply replies "boy" to all inquiries. In the worst case, everyone who has a girl will ask for her money back. Find the expected value of the psychic's profit byflling in the table below Sex of Child Boy Girl Probability 0.51 0.49 The Psychic's Profit expected profit

Explanation / Answer

Profit

Boy = Given that it is a boy, he will earn only when he says boy

Profit = 0.51 * 25 = 12.75

Girl

Profit = 0 since he says it is a boy

So, expected profit = $12.75

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