Suppose Your Utility Function for Income That Takes the Form

question 115

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:

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