(Table: Income and Utility for Tyler) The table Income and Utility for Tyler shows the utility Tyler receives at various income levels, but she does not know what her income will be next year.There is a 40% chance her income will be $20,000, a 40% chance her income will be
$30,000, and a 20% chance her income will be $40,000.What is her expected utility?
A)3,270 utils
B)3,144 utils
C)3,420 utils
D)3,480 utils

Question

Quizplus · Accepted Answer

Tyler's expected utility can be calculated as follows:
0.4(2,310) + 0.4(3,240) + 0.2(4,095) = 930 + 1,296 + 819 = 3,045
Thus, her expected utility is 3,045 utils. Looking at the table, we can see that the highest utility she can attain is 3,240 utils at an income level of $30,000. Therefore, the best choice for Tyler would be to choose an income level of $30,000 if she has control over her income.

(Table: Income and Utility for Tyler) the Table Income and Utility