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(Table: Total Utility and Choices with Uncertainty and Scenario: a Novelist

Question 164

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(Table: Total Utility and Choices with Uncertainty and Scenario: A Novelist or a Teacher) Use Table: Total Utility and Choices with Uncertainty and Scenario: A Novelist or a Teacher. Suppose that the probability that a biography is not a success is 30%, that it is a success is 50%, and that it is a success and optioned for a movie is 20%. Given this information, Elizabeth, as a utility maximizer:
Scenario: A Novelist or a Teacher
Elizabeth is working as a high school English teacher and is considering leaving her teaching job to ghost write biographies for Hollywood actors. Her teaching job pays $40,000 per year. In contrast, the ghost writing will pay $25,000 for the first year whether the biography is a success or not, $50,000 if it is a success, and $100,000 if it is a success and is optioned for a movie deal. Elizabeth is a utility maximizer; her utility function is shown in the table.
 Table: Total Utility and Choices with Uncertainty  Income  Total Utility (utils)  $25,0001,50030,0001,90035,0002,25040,0002,55045,0002,80050,0003,00055,0003,15060,0003,25065,0003,300100,0003,500{ \text { Table: Total Utility and Choices with Uncertainty } } \\\begin{array} { | l | l | } \hline \text { Income } & \text { Total Utility (utils) } \\\hline \$ 25,000 & 1,500 \\\hline 30,000 & 1,900 \\\hline 35,000 & 2,250 \\\hline 40,000 & 2,550 \\\hline 45,000 & 2,800 \\\hline 50,000 & 3,000 \\\hline 55,000 & 3,150 \\\hline 60,000 & 3,250 \\\hline 65,000 & 3,300 \\\hline 100,000 & 3,500 \\\hline\end{array}


A) should keep her teaching job.
B) should quit her teaching job and go to Hollywood.
C) will be indifferent between leaving and staying because her expected income is the same whether she remains a teacher or moves to Hollywood.
D) will be indifferent between leaving and staying because her expected total utility is the same whether she remains a teacher or moves to Hollywood.

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