Refer to the data provided in Table 17.5 below to answer the following question(s). The table shows the relationship between income and utility for Lucy.
Table 17.5
$$\begin{array} { | c | c | }
\hline \text { Income } & \text { Total Utility } \
\hline \$ 0 & 0 \
\hline \$ 10,000 & 10 \
\hline \$ 20,000 & 20 \
\hline \$ 30,000 & 30 \
\hline \$ 40,000 & 40 \
\hline
\end{array}$$
-Refer to Table 17.5. Lucy earns $20,000 annually. She has the opportunity to bet her entire salary on the upcoming super bowl. If Lucy takes the bet, she will pick the Packers. She believes that the Packers have a 50-50 chance of winning the game. If the Packers win, then Lucy will win $38,000. However, if they lose she loses her entire salary ($0). Will Lucy take the bet?
A) yes
B) no
C) maybe
D) indeterminate from the given information

Question

Refer to the data provided in Table 17.5 below to answer the following question(s). The table shows the relationship between income and utility for Lucy.
Table 17.5
 $$\begin{array} { | c | c | } 
\hline \text { Income } & \text { Total Utility } \
\hline \$ 0 & 0 \
\hline \$ 10,000 & 10 \
\hline \$ 20,000 & 20 \
\hline \$ 30,000 & 30 \
\hline \$ 40,000 & 40 \
\hline
\end{array}$$
-Refer to Table 17.5. Lucy earns $20,000 annually. She has the opportunity to bet her entire salary on the upcoming super bowl. If Lucy takes the bet, she will pick the Packers. She believes that the Packers have a 50-50 chance of winning the game. If the Packers win, then Lucy will win $38,000. However, if they lose she loses her entire salary ($0). Will Lucy take the bet?
A) yes
B) no
C) maybe
D) indeterminate from the given information

Quizplus · Accepted Answer

Lucy's current utility with a $20,000 income is 20. If she wins the bet, her total income would be $38,000, which is not listed in the table but we can infer it would give her a utility less than 40 since utility increases with income but at a diminishing rate. If she loses, her utility would be 0. Given the risk of dropping to a utility of 0 compared to a guaranteed utility of 20, a risk-averse individual like Lucy would likely not take the bet.

Refer to the Data Provided in Table 17 -Refer to Table 17