Markus is considering an investment that has a 30% chance of providing a value in utility worth $20,000 and a 70% chance of incurring a loss of utility worth $7,000. What is Markus's expected utility from this investment?

Question

Quizplus · Accepted Answer

The expected utility is calculated by multiplying each outcome by its probability and then summing these products. For Markus's investment, this is (0.30 * $20,000) + (0.70 * -$7,000) = $6,000 - $4,900 = $1,100.

Markus Is Considering an Investment That Has a 30% Chance