Yoram's expected utility function is pc ₁ + (1 - p) c
₂, where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Wilbur is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2,500 with probability .30 and $3,600 with probability .70. Wilbur will choose the sure payment if

Question

Yoram's expected utility function is pc ₁ + (1 - p)c ₂, where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Wilbur is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2,500 with probability .30 and $3,600 with probability .70. Wilbur will choose the sure payment if A) Z > 3,249 and the lottery if Z < 3,249. B) Z > 2,874.50 and the lottery if Z < 2,874.50. C) Z > 3,600 and the lottery if Z < 3,600. D) Z > 3,424.50 and the lottery if Z < 3,424.50. E) Z > 3,270 and the lottery if Z < 3,270.

Quizplus · Accepted Answer

The Answer of Yoram's expected utility function is pc ₁ + (1 - p)c ₂, where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Wilbur is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2,500 with probability .30 and $3,600 with probability .70. Wilbur will choose the sure payment if A) Z > 3,249 and the lottery if Z < 3,249. B) Z > 2,874.50 and the lottery if Z < 2,874.50. C) Z > 3,600 and the lottery if Z < 3,600. D) Z > 3,424.50 and the lottery if Z < 3,424.50. E) Z > 3,270 and the lottery if Z < 3,270.

Yoram's Expected Utility Function Is Pc 1

Yoram's Expected Utility Function Is Pc ₁