The Manager's Utility Function for Profit Is U $\pi$ )= 50 $\pi$

question 15

Multiple Choice

The manager's utility function for profit is U( $\pi$ ) = 50 $\pi$ ,where $\pi$ is the dollar amount of profit.The manager is considering a risky decision with the four possible profit outcomes shown below.The manager makes the following subjective assessments about the probability of each profit outcome: $$\begin{array} { c c } \text { Probability } & \text { Profit outcome (\$) } \\\hline 0.20 & - \$ 15,000 \\0.30 & - \$ 5,000 \\0.30 & \$ 5,000 \\0.20 & \$ 25,000\end{array}$$ What is the expected utility of profit?

• A)-2,500
• B)5,000
• C)15,000
• D)30,000
• E)100,000