Consider the following risky prospect: $\begin{array} { | c | c | c | }
\hline \text { MONEY } & \text { UTLITY } & \text { PROBABILTTY } \
\hline \$ 20,000 & 10 & 0.2 \
\hline \$ 30,000 & 18 & 0.2 \
\hline \$ 40,000 & 24 & 0.6 \
\hline
\end{array}$ The expected utility is equal to:
A) $30,000.
B) 18.
C) 20.
D) 24.
E) $34,000.

Question

Consider the following risky prospect: $\begin{array} { | c | c | c | } 
\hline \text { MONEY } & \text { UTLITY } & \text { PROBABILTTY } \
\hline \$ 20,000 & 10 & 0.2 \
\hline \$ 30,000 & 18 & 0.2 \
\hline \$ 40,000 & 24 & 0.6 \
\hline
\end{array}$ The expected utility is equal to:
A) $30,000.
B) 18.
C) 20.
D) 24.
E) $34,000.

Quizplus · Accepted Answer

The expected utility is calculated by multiplying each utility by its probability and summing the results: (10 * 0.2) + (18 * 0.2) + (24 * 0.6) = 2 + 3.6 + 14.4 = 20.

Consider the Following Risky Prospect The Expected Utility Is Equal To: A) $30,000

Consider the Following Risky Prospect The Expected Utility Is Equal To:
A) $30,000