A real estate agent spends $1,500 on advertising for three months to sell an average house. If the house sells in three months, the agent earns $9,000. Otherwise, he loses the listing and earns nothing. If there is a 40% chance that the house will sell in three months, what is the expected revenue for the real estate agent?

If the house sells, the agent earns $9,000; if it does not, he earns $0. The expected earnings before advertising costs are 0.40 × $9,000 + 0.60 × $0 = $3,600. Subtract the $1,500 spent on advertising: $3,600 − $1,500 = $2,100, so the expected revenue after the cost is $2,100.

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