(Table: Utility Function II) Suppose the Person's Utility Function Is

question 43

Multiple Choice

(Table: Utility Function II) Suppose the person's utility function is given by U = I^0.5, where I is income. What guaranteed income level would offer the same expected utility level as that from the uncertain income (i.e., find the certainty equivalent) ?

• A) $432,600
• B) $464,400
• C) $448,900
• D) $457,000

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Definitions:

Equilibrium

A state where market supply and demand balance each other, and, as a result, prices become stable.

University City

An urban area typically dominated by its university population, often featuring a high density of academic, housing, and social infrastructure for students.

Incomes

Regular financial earnings from labor or investment activities.

Government Policies

Measures and laws enacted by a government to influence economic, social, or political issues.