Suppose your utility function for income that takes the form U(I) = , and you are considering a self-employment opportunity that may pay $10,000 per year or $40,000 per year with equal probabilities. What certain income would provide the same satisfaction as the expected utility from the self-employed position?
A) $15,000
B) $22,500
C) $25,000
D) $27,500

Question

Suppose your utility function for income that takes the form U(I) =  , and you are considering a self-employment opportunity that may pay $10,000 per year or $40,000 per year with equal probabilities. What certain income would provide the same satisfaction as the expected utility from the self-employed position?
A) $15,000 
B) $22,500 
C) $25,000 
D) $27,500

Quizplus · Accepted Answer

The Answer of Suppose your utility function for income that takes the form U(I) =  , and you are considering a self-employment opportunity that may pay $10,000 per year or $40,000 per year with equal probabilities. What certain income would provide the same satisfaction as the expected utility from the self-employed position?
A) $15,000 
B) $22,500 
C) $25,000 
D) $27,500

Suppose Your Utility Function for Income That Takes the Form