Assume That the Utility Function of an Individual Is Represented

question 59

Multiple Choice

Assume that the utility function of an individual is represented as U =√W - 0.001W; where W (his present wealth) = $250,000.He considers investing in a gamble which would double his wealth if he wins but still leave him with $250,000 if he loses.Given that his probability of winning is 0.6, calculate his expected utility of taking the bet.

• A)157 units
• B)250 units
• C)207.11 units
• D)224.3 units

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Definitions:

Economic Growth

An augmentation in the volume of goods and services generated within an economy during a specific period, often quantified by GDP.

Disproportionate Burden

A situation where the costs, impacts, or benefits of a decision, policy, or action fall more heavily on a particular group or sector.

Poverty

A condition where individuals or communities lack the financial resources to meet a minimum standard of living, including basic necessities such as food, clothing, and shelter.

Poverty Rate

The percentage of a population living below the national poverty line, indicating the proportion of individuals or households with income levels insufficient for basic living standards.