-James Has a Utility of Wealth Schedule in the Above

question 209

Multiple Choice

-James has a utility of wealth schedule in the above table. He is offered a job selling video games at Games Galore. James' compensation depends on how much he sells. In a poor sales period, a salesperson makes $100 per month. In a good sales period, a salesperson makes $600 per month. James is told by the manager that, in any given month, there is a 25 percent chance of a poor sales period and a 75 percent chance of a good sales period. Suppose that one of James' professors offers him the opportunity to be a research assistant for a fixed and guaranteed amount each month. What amount must James' professor pay in order to make James indifferent between being a research assistant and working at Games Galore?

• A) $300 per month
• B) $350 per month
• C) $475 per month
• D) $600 per month

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Definitions:

Mainframe Computers

Large and powerful computing systems used for bulk data processing, such as census, industry and consumer statistics, and financial transaction processing.

Modern RAM

The latest versions of Random Access Memory, designed to be faster and more efficient, supporting current computing requirements.

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A device used to perform mathematical operations, manually operated before the advent of electronic calculators.