(Table: Amy's Utility Function) Look at the Table Choosing Insurance

question 142

Multiple Choice

(Table: Amy's Utility Function) Look at the table Choosing Insurance.Amy is an entrepreneur with current income equal to $40,000.Amy is considering development of a new product.The probability that her new product earns Amy $10,000 in additional income is 0.5, and the probability that Amy incurs a reduction of $10,000 from her current income is also 0.5.Suppose Amy can buy a fair insurance policy that will compensate her for any losses.Amy's premium will be ________, her guaranteed income will be , and her expected utility
Will be utils.

• A)$5,000; $10,000; 200
• B)$10,000; $30,000; 500
• C)$10,000; $40,000; 620
• D)$30,000; $50,000; 720

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Definitions:

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