Jim has a choice between two jobs.Job A would pay him $15 an hour with certainty,and the job B is commission based where he could earn $12,with a 50% probability and $18 with a 50% probability.Which job would he choose?
A)Job A
B)Job B
C)Neither of the jobs
D)He would choose to exit the labor market

Question

​Jim has a choice between two jobs.Job A would pay him $15 an hour with certainty,and the job B is commission based where he could earn $12,with a 50% probability and $18 with a 50% probability.Which job would he choose?
A)​Job A
B)Job B
C)Neither of the jobs
D)​He would choose to exit the labor market

Quizplus · Accepted Answer

The expected earnings from Job B are calculated as (0.5 * $12) + (0.5 * $18) = $15, which is the same as the certain pay from Job A. However, Job A offers certainty in earnings, which is typically preferred over uncertainty when the expected values are the same, due to risk aversion.

​Jim Has a Choice Between Two Jobs

Jim Has a Choice Between Two Jobs