-Gunnar can work as a campus security officer at a guaranteed salary of $20,000 per year or as a real estate agent. If Gunnar works as a real estate agent, there is a 50 percent chance that he will earn $10,000 per year and a 50 percent chance that he will earn $30,000 per year. Based on the above table, to maximize his expected utility, Gunnar will
A) choose to work as a campus security officer.
B) choose to work as a real estate agent.
C) be indifferent between being a campus security officer and being a real estate agent.
D) It is impossible to tell which job he would prefer without additional information.

Question

-Gunnar can work as a campus security officer at a guaranteed salary of $20,000 per year or as a real estate agent. If Gunnar works as a real estate agent, there is a 50 percent chance that he will earn $10,000 per year and a 50 percent chance that he will earn $30,000 per year. Based on the above table, to maximize his expected utility, Gunnar will
A) choose to work as a campus security officer. 
B) choose to work as a real estate agent. 
C) be indifferent between being a campus security officer and being a real estate agent. 
D) It is impossible to tell which job he would prefer without additional information.

Quizplus · Accepted Answer

The expected utility of working as a campus security officer is $20,000. The expected utility of working as a real estate agent is 0.5 * $10,000 + 0.5 * $30,000 = $20,000. Therefore, Gunnar will choose to work as a campus security officer.

-Gunnar Can Work as a Campus Security Officer at a Guaranteed