Use the following to answer questions:
-(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 in utils?
A) 3,270
B) 3,144
C) 3,420
D) 3,480

Question

Use the following to answer questions: 
-(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 in utils?
A) 3,270 
B) 3,144 
C) 3,420 
D) 3,480

Quizplus · Accepted Answer

To find the expected utility, multiply each utility by its probability and sum them up. If the utilities corresponding to the incomes are known, apply this formula: Expected Utility = (0.4 * Utility at $20,000) + (0.4 * Utility at $30,000) + (0.2 * Utility at $40,000). The correct answer is based on this calculation.

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