(Figure: Utility Function) Use the utility function graph to answer the question.
Jo has income of $40,000. She is faced with an opportunity that has an equal chance of resulting in an additional $10,000 in income or a loss of $10,000 in income. Using expected utility as the deciding factor, should Jo pursue the opportunity?
A) Yes, the potential increase in utility is larger than the potential decrease in utility.
B) No, the potential increase in utility is less than the potential decrease in utility.
C) It is a toss-up because her expected rise in utility exactly offsets her expected loss in utility.
D) She can expect her utility to remain unchanged regardless of what she does.
Correct Answer:
Verified
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