Assume that the utility function of an individual is represented as U = ?W - 0.001W; where W (his present wealth) = $250,000 . He considers investing in a gamble which would double his wealth if he wins but still leave him with $250,000 if he loses. Given that his probability of winning is 0.6, calculate his expected utility of taking the bet
a. 157 units
b. 250 units
c. 207.11 units
d. 224.3 units
D
You might also like to view...
The multiplier equals
A) consumption/real disposable income. B) change in consumption/change in real disposable income. C) 1/MPC. D) 1/(1 - MPC).
GDP per capita means
A. gross domestic product per employee. B. gross domestic product per person. C. gross domestic product per dollar in revenue. D. gross domestic product per business.
To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
To attract more bidders, and more aggressive bidders, to your common-value auction
a. withhold relevant information about the value of the object b. don't allow bidders to know how others are bidding c. allow potential bidders ample time to examine the object being sold d. do not hold oral auctions