Suppose That the Utility Function for a Decision Maker Is

question 50

Essay

Suppose that the utility function for a decision maker is represented as follows:
U(x)= x².The potential payoffs that are possible are illustrated below.
Payoff (x)
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1000
Convert these payoffs into utility values using the above function.Plot the utility curve and determine whether the decision maker is a risk avoider,risk indifferent,or a risk seeker.

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Definitions:

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Parasympathetic

Part of the autonomic nervous system that conserves energy as it slows the heart rate, increases intestinal and gland activity, and relaxes sphincter muscles in the gastrointestinal tract.

Hippocrates

An ancient Greek physician often referred to as the "Father of Medicine," whose teachings and practices laid the foundation for modern medicine.

Thyroid Gland

An endocrine gland in the neck that produces hormones regulating growth, metabolism, and energy levels.