Using the Following:
the Manager's Utility Function for Profit Is $\pi$

question 24

Multiple Choice

Using the following:
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:
$$\begin{array} { c c } \text { Probability } & \text { Profit outcome (\$) } \\\hline 0.20 & - \$ 15,000 \\0.30 & - \$ 5,000 \\0.30 & \$ 5,000 \\0.20 & \$ 25,000\end{array}$$
-The marginal utility of an extra dollar of profit is __________.

• A) 0.20
• B) 0.30
• C) 1.0
• D) 10
• E) none of the above

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