Suppose That Philip Is the Best Contractor in Town, and He

question 493

Multiple Choice

Suppose that Philip is the best contractor in town, and he makes $400,000 a year. Suppose that Julia Roberts is the best and highest paid actress in Hollywood, and she makes $13 million per movie. Both are the best in their respective fields of work. One reason for the significant difference in incomes has to do with the nature of the service each offers. Philip's contracting services

• A)can be provided to an unlimited number of customers in a year, but Julia's work is sold to only a few individuals in a year.
• B)can only be provided to a limited number of customers in a year, but Julia's work is sold to millions of individuals in a year - i.e., to anyone who has the willingness and ability to pay for admission to her movies.
• C)can be provided to a unlimited number of customers in a year, and Julia's work is sold to millions of individuals in a year - i.e., to anyone who has the willingness and ability to pay for admission to her movies.
• D)can only be provided to a limited number of customers in a year, and Julia's work is sold to only a few individuals in a year.

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Definitions:

Wealth

The total value of all financial and material possessions owned by an individual, entity, or country.

Probability

A measure of the likelihood that a specific event will occur, often expressed as a number between 0 and 1, where 1 represents certainty.

Von Neumann-Morgenstern Utility Function

A mathematical model that represents an individual's preference structure in a way that allows for measurable utility and decision-making under uncertainty.

Expected Utility Maximizer

An economic agent who makes choices under uncertainty to maximize their expected satisfaction or utility.