General Studies · Decision Making Under Uncertainty
Lexi plans to sell homemade cakes on weekdays. He must choose between setting up a stall at the local railway station or a stand near the bus station. His calculations show that the expected value of daily profit from the railway station is $240, while the expected value of daily profit from the bus station is $275. Based on these expected values, which of the following statements about Lexi's choice is correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Expected values should not be used to make his decision as they have little meaning when considering a long-term daily project.
- 2If he is risk-seeking, he should choose the bus station.
- 3If he is risk-averse, he should choose the railway station.
- 4If he is risk-neutral, he should choose the bus station.✓
Correct answer
If he is risk-neutral, he should choose the bus station.
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