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Suppose Your Current Wealth (W) Is $8000 and You Obey

Question 1

Multiple Choice

Suppose your current wealth (W) is $8000 and you obey the principles of expected utility theory. Suppose you are offered a gamble where you can win $4000 with one-half chance but you can lose $4000 with one half-chance. Suppose your utility function is defined as U(W) =2W. To you, the expected utility of this gamble is:


A) 16,000.
B) 8,000.
C) 12,000
D) 4,000.

Correct Answer:

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