Refer to the Information Provided in Figure 17

question 14

Multiple Choice

Refer to the information provided in Figure 17.2 below to answer the question(s) that follow. Figure 17.2
-Refer to Figure 17.2. Fiona has two job offers when she graduates from college. Fiona views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $60,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of $80,000. Fiona believes that she has a 50-50 chance of earning the bonus. If Fiona takes the offer that maximizes her expected utility and she is risk-neutral, then

• A) she will take the first offer.
• B) she will take the second offer.
• C) she is indifferent between the offers-both yield the same expected utility.
• D) Indeterminate from the given information-we cannot say what she will do.

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Definitions:

Demand and Supply

Fundamental economic concepts representing the quantity of a good or service consumers are willing and able to purchase and the quantity offered by sellers.

Inferior Good

An inferior good is a type of good whose demand decreases when consumer income rises, unlike normal goods, for which the opposite is observed.

Income

Earnings received by an individual or entity in exchange for labor or investment, typically expressed in monetary terms.

Demand Curve

A pictorial representation that maps out the correlation between a good's price and its demand over an allotted time.