-James has a utility of wealth schedule in the above table. He is offered a job selling video games at Games Galore. James' compensation depends on how much he sells. In a poor sales period, a salesperson makes $100 per month. In a good sales period, a salesperson makes $600 per month. James is told by the manager that, in any given month, there is a 25 percent chance of a poor sales period and a 75 percent chance of a good sales period. What is James' expected income from taking this job?
A) $100
B) $350
C) $475
D) $600

Question

-James has a utility of wealth schedule in the above table. He is offered a job selling video games at Games Galore. James' compensation depends on how much he sells. In a poor sales period, a salesperson makes $100 per month. In a good sales period, a salesperson makes $600 per month. James is told by the manager that, in any given month, there is a 25 percent chance of a poor sales period and a 75 percent chance of a good sales period. What is James' expected income from taking this job?
A) $100 
B) $350 
C) $475 
D) $600

Quizplus · Accepted Answer

James' expected income is calculated by multiplying each outcome by its probability and summing the results: (0.25 * $100) + (0.75 * $600) = $25 + $450 = $475.

-James Has a Utility of Wealth Schedule in the Above