Suppose Your Utility Function for Income That Takes the Form

question 90

Multiple Choice

Suppose your utility function for income that takes the form U(I) = , and you are considering a self-employment opportunity that may pay $10,000 per year or $40,000 per year with equal probabilities. What certain income would provide the same satisfaction as the expected utility from the self-employed position?

• A) $15,000
• B) $22,500
• C) $25,000
• D) $27,500

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Definitions:

CISG

The United Nations Convention on Contracts for the International Sale of Goods, a treaty that provides a uniform framework for international commerce.

Modifications

refers to changes or alterations made to the terms of a contract, agreement, or in the design of a product or system.

Contracts

Legal agreements between parties that are enforceable by law.

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing and signed by the parties to be enforceable.