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A game has an expected net gain of \(\$0\) for the player. Does this mean the player will break even on every play? Answer yes or no and state what the expected value means.
Hints
- Distinguish one outcome from an average over many repetitions.
- Think about what the word “expected” means in a probability distribution.
Solution
1. No. Expected value describes a long-run average, not the outcome of each individual play.
2. Over many plays, the average net gain per play is expected to be close to \(\$0\).
Answer
No. It means the long-run average net gain per play is expected to be close to \(\$0\), not that every play breaks even.
