Jeff Holds $50,000 Wealth Which Has a Utility of 7

question 23

Multiple Choice

Jeff holds $50,000 wealth which has a utility of 7.07 utils (assuming utility is the square root of wealth in thousand dollars) .He considers investing this in a gamble which has a 0.6 probability of increasing his total wealth to $100,000 and 0.4 probability of decreasing it to $30,000.What will be Jeff's expected utility from the gamble?

• A)15 utils
• B)8.19 utils
• C)3.2 utils
• D)12.12 utils

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Definitions:

Case Study

A carefully drawn biography of an individual.

Standardized Intelligence Test

A psychometric test designed to measure a person's intellectual capabilities in comparison to the population.

IQ Scores

Quantitative measures of intelligence, typically obtained through standardized tests, reflecting cognitive abilities in relation to a peer group.

Inherently Good

A philosophical and ethical stance suggesting that human beings are born with an innate tendency towards goodness.