(See Problem 11

question 9

Multiple Choice

(See Problem 11.) Albert's expected utility function is , where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Albert is offered a choice between getting a sure payment of $Z or a lottery in which he receives $400 with probability .30 or $2,500 with probability .70. Albert will choose the sure payment if

• A) Z > 2,090.50 and the lottery if Z < 2,090.50.
• B) Z > 1,040.50 and the lottery if Z < 1,040.50.
• C) Z > 2,500 and the lottery if Z < 2,500.
• D) Z > 1,681 and the lottery if Z < 1,681.
• E) Z > 1,870 and the lottery if Z < 1,870.

---

Definitions:

Total Resource Cost

The total costs incurred for the production of goods and services, including all raw materials, labor, and overhead.

Resource

An asset or input used to produce goods and services, including time, money, labor, and natural resources.

Purely Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a homogeneous product, leading to price takers on both sides of the market.

Imperfectly Competitive Market

A market structure where individual sellers have some control over the price of their goods due to product differentiation or other factors.