-Andrew's utility of wealth schedule is depicted 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. Given the nature of Andrew's job offers and his utility of wealth schedule, Andrew's expected utility from working as a cook is ________ and from working as a server is ________.
A) 170 units; 170 units
B) 130 units; 190 units
C) 170 units; 160 units
D) 200 units; 190 units

Question

-Andrew's utility of wealth schedule is depicted 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. Given the nature of Andrew's job offers and his utility of wealth schedule, Andrew's expected utility from working as a cook is ________ and from working as a server is ________.
A) 170 units; 170 units 
B) 130 units; 190 units 
C) 170 units; 160 units 
D) 200 units; 190 units

Quizplus · Accepted Answer

Andrew's expected utility from working as a cook is 170 units (utility of $10,000). For the server job, the expected utility is 0.5 * utility of $5,000 + 0.5 * utility of $15,000 = 0.5 * 130 + 0.5 * 190 = 160 units.

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