-Adriana wants to try working as an independent contractor this summer. She has a 50 percent chance that she will make $9,000 and 50 percent chance that she will make nothing. Her utility of wealth curve is shown in the figure above. What's Adriana's expected utility from taking this job?
A) 45
B) $4,500
C) $2,000
D) 40

Question

-Adriana wants to try working as an independent contractor this summer. She has a 50 percent chance that she will make $9,000 and 50 percent chance that she will make nothing. Her utility of wealth curve is shown in the figure above. What's Adriana's expected utility from taking this job?
A) 45 
B) $4,500 
C) $2,000 
D) 40

Quizplus · Accepted Answer

Adriana's expected utility is calculated by taking the average of the utilities of the possible outcomes. If she makes $9,000, her utility is 80 (from the utility curve), and if she makes nothing, her utility is 0. The expected utility is (0.5 * 80) + (0.5 * 0) = 40.

-Adriana Wants to Try Working as an Independent Contractor This