Use the Following to Answer Questions

question 14

Multiple Choice

Use the following to answer questions:
-(Table: Amy's Utility Function) Look at the table Amy's Utility Function. 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:

Mature Taiga

A biome characterized by dense forests of conifers in the northern regions that have reached a mature ecological stage with complex ecosystems.

Mature Tropical Rain Forest

A type of forest found in the tropics characterized by high levels of rainfall, biodiversity, and old, fully developed trees.

Low-pressure Air Mass

A region of the atmosphere where the air pressure is lower than surrounding areas, often resulting in cloudy weather and precipitation.

Temperate Deciduous Forests

Forests located in temperate zones featuring trees that lose their leaves seasonally and are adapted to handle cold winters and warm summers.