-James Has a Utility of Wealth Schedule in the Above

question 220

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. Comparing the two opportunities, working at Games Galore versus being a research assistant, what is James' cost of risk?

• A) $125 per month
• B) $175 per month
• C) $375 per month
• D) $500 per month

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Definitions:

Advanced Cognitive Skills

Higher-level mental abilities, including problem-solving, decision-making, critical thinking, and creativity, that facilitate complex understanding and learning.

Creative Traits

Characteristics or qualities associated with the ability to produce new and original ideas, concepts, or products.

Motivation

Motivation is the psychological process that arouses and directs goal-oriented behavior, stemming from both internal desires like needs and interests, and external factors like rewards and social expectations.

Creative

Characterized by the ability or quality of producing something new, original, or imaginative through unconventional thinking or approaches.