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. Dmitri has two job offers when he graduates from college. Dmitri views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $40,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of $40,000. Dmitri believes that he has a 50-50 chance of earning the bonus. Dmitri's expected utility from the first job offer is ________ and it is ________ from the second job offer.
A) 180; 210
B) 180; 110
C) 180; 160
D) 90; 160

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. Dmitri has two job offers when he graduates from college. Dmitri views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $40,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of $40,000. Dmitri believes that he has a 50-50 chance of earning the bonus. Dmitri's expected utility from the first job offer is ________ and it is ________ from the second job offer.
A) 180; 210 
B) 180; 110 
C) 180; 160 
D) 90; 160

Quizplus · Accepted Answer

The expected utility from the first job offer remains constant as it is a fixed amount, so without knowing the utility function, we assume it's 180 based on the options provided. For the second job offer, the expected utility is calculated by taking the average of the utility with and without the bonus, given a 50-50 chance. Assuming the utility without the bonus is the same as the fixed salary job and the utility with the bonus is higher, the average would be between the utility of the fixed salary job and a higher value, which is given as 160 in the options.

Refer to the Information Provided in Figure 17