If a man purchases a raffle ticket, he can win a first price of $50,000 or a second price of
$20, 000 with probabilities 0.001 and 0.003. What should be a fair price to pay for the ticket?

Fair is in the eye of the beholder. The organization selling the raffle ticket expects to earn a "fair" return for selling the ticket. Market pressures will tend to balance the different expectations onto a price that will be different from either view of a fair price.

I would base fair also on the number of tickets sold. If only two tickets are sold and you have a 50% chance of either prize - hmm, what would you pay?

But I guess they are giving us the number of tickets sold based on the probabilities.