(See Problem 11

question 5

Multiple Choice

(See Problem 11.) Lawrence's expected utility function is , where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂. Lawrence 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. Lawrence will choose the sure payment if

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

---

Definitions:

Golden Age

A period in history marked by peace, prosperity, and cultural achievements, often idealized or considered a pinnacle in a civilization's history.

Stable Prices

A situation in the economy where prices of goods and services remain consistent over time without significant inflation or deflation.

Trade Surplus

A situation where a country's exports exceed its imports over a certain period, leading to a positive balance of trade.

Economic Engines

Key industries or sectors within an economy that drive economic growth, employment, and wealth generation.