-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:

Equilibrium

A state in a chemical reaction where the rates of the forward and reverse reactions are equal, leading to no overall change in the concentration of reactants and products.

Catalyst

A substance that increases the rate of a chemical reaction without being consumed or permanently altered in the process.

Equilibrium Constant

A numerical value that expresses the ratio of concentrations of products to reactants at equilibrium for a reversible chemical reaction at a constant temperature.

Reactants

Substances initially present in a chemical reaction that are consumed during the reaction to make products.