In Problem 9, Billy has a von Neumann-Morgenstern utility function U(c) . If Billy is not injured this season, he will receive an income of 16 million dollars. If he is injured, his income will be only 10,000 dollars. The probability that he will be injured is .1 and the probability that he will not be injured is .9. His expected utility is
A) 3,610 dollars.
B) 7,220 dollars.
C) 100,000 dollars.
D) between 15 and 16 million dollars.
E) 14,440 dollars.

Question

In Problem 9, Billy has a von Neumann-Morgenstern utility function U(c)  . If Billy is not injured this season, he will receive an income of 16 million dollars. If he is injured, his income will be only 10,000 dollars. The probability that he will be injured is .1 and the probability that he will not be injured is .9. His expected utility is
A) 3,610 dollars. 
B) 7,220 dollars. 
C) 100,000 dollars. 
D) between 15 and 16 million dollars. 
E) 14,440 dollars.

Quizplus · Accepted Answer

The Answer is A

In Problem 9, Billy Has a Von Neumann-Morgenstern Utility Function