Assume Brandon's benefit function for water is S(W) = ?W and he consumes water both in droughts, WD, or in the rainy season, WR. Assume his current consumption bundle is WD = 400 and WR = 100 and the probability of drought is 0.75. Brandon's certainty equivalent is:
A. 250 units of water.
B. 306.25 units of water.
C. 18.75 units of water.
D. 17.5 units of water.
B. 306.25 units of water.
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