Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1
-Refer to Figure 17.1. John has two job offers when he graduates from college. John views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $50,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of $60,000. John believes that he has a 50-50 chance of earning the bonus. What is John's expected utility for each job offer?
A) expected utility of 200 for the first offer and expected utility of 218 for the second offer
B) expected utility of 200 for the first offer and expected utility of 110 for the second offer
C) expected utility of 200 for the first offer and expected utility of 164 for the second offer
D) expected utility of 100 for the first offer and expected utility of 164 for the second offer

Question

Refer to the information provided in Figure 17.1 below to answer the question(s) that follow.  Figure 17.1
-Refer to Figure 17.1. John has two job offers when he graduates from college. John views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $50,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of $60,000. John believes that he has a 50-50 chance of earning the bonus. What is John's expected utility for each job offer?
A) expected utility of 200 for the first offer and expected utility of 218 for the second offer 
B) expected utility of 200 for the first offer and expected utility of 110 for the second offer 
C) expected utility of 200 for the first offer and expected utility of 164 for the second offer 
D) expected utility of 100 for the first offer and expected utility of 164 for the second offer

Quizplus · Accepted Answer

The expected utility for the first offer is straightforward since it's a fixed amount, so its utility is directly calculated from that amount. For the second offer, the expected utility is calculated by taking the average of the utility of the $20,000 salary and the utility of the $80,000 total ($20,000 salary + $60,000 bonus), assuming a 50% chance of receiving the bonus. The correct answer must accurately reflect this calculation.

Refer to the Information Provided in Figure 17