(See Problem 11.) Pete's expected utility function is , where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Pete is offered a choice between getting a sure payment of $Z or a lottery in which he receives $1,600 with probability .80 or $14,400 with probability .20. Pete will choose the sure payment if A) Z 3,136 and the lottery if Z 8,768 and the lottery if Z 14,400 and the lottery if Z 2,368 and the lottery if Z 4,160 and the lottery if Z

Question

(See Problem 11.) Pete's expected utility function is , where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Pete is offered a choice between getting a sure payment of $Z or a lottery in which he receives $1,600 with probability .80 or $14,400 with probability .20. Pete will choose the sure payment if A) Z > 3,136 and the lottery if Z < 3,136. B) Z > 8,768 and the lottery if Z < 8,768. C) Z > 14,400 and the lottery if Z < 14,400. D) Z > 2,368 and the lottery if Z < 2,368. E) Z > 4,160 and the lottery if Z < 4,160.

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The Answer of (See Problem 11.) Pete's expected utility function is , where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Pete is offered a choice between getting a sure payment of $Z or a lottery in which he receives $1,600 with probability .80 or $14,400 with probability .20. Pete will choose the sure payment if A) Z > 3,136 and the lottery if Z < 3,136. B) Z > 8,768 and the lottery if Z < 8,768. C) Z > 14,400 and the lottery if Z < 14,400. D) Z > 2,368 and the lottery if Z < 2,368. E) Z > 4,160 and the lottery if Z < 4,160.