Rhonda's Utility of Wealth Is 65 Units at $5,000, 80

question 188

Multiple Choice

Rhonda's utility of wealth is 65 units at $5,000, 80 units at $7,000, and 95 units at $10,000. Starting from zero wealth, she must choose between options A and B. Option A gives her $7,000 for sure. Option B gives her $5,000 with probability 0.6 or $10,000 with probability 0.4. Rhonda

• A) will choose A.
• B) will choose B.
• C) is indifferent between A and B.
• D) needs more information to make a choice.