-Andrew's utility of wealth schedule is given in the above table. Andrew is offered a job as a cook which pays $10,000. He is also offered a job as a server which will pay $5,000 if tips are poor and $15,000 if tips are good. There is a 50 percent chance that tips will be poor and a 50 percent chance that tips will be good. The expected income from the job as a cook is ________ and from the job as a server is ________.
A) $10,000; $15,000
B) $5,000; $5,000
C) $10,000; $5,000
D) $10,000; $10,000

Question

-Andrew's utility of wealth schedule is given in the above table. Andrew is offered a job as a cook which pays $10,000. He is also offered a job as a server which will pay $5,000 if tips are poor and $15,000 if tips are good. There is a 50 percent chance that tips will be poor and a 50 percent chance that tips will be good. The expected income from the job as a cook is ________ and from the job as a server is ________.
A) $10,000; $15,000 
B) $5,000; $5,000 
C) $10,000; $5,000 
D) $10,000; $10,000

Quizplus · Accepted Answer

The expected income from the job as a cook is $10,000. For the server job, the expected income is calculated as (0.5 * $5,000) + (0.5 * $15,000) = $10,000.

-Andrew's Utility of Wealth Schedule Is Given in the Above