In Problem 9, Billy Has a Von Neumann-Morgenstern Utility Function

question 23

Multiple Choice

In Problem 9, Billy has a von Neumann-Morgenstern utility function U(c) . If Billy is not injured this season, he will receive an income of 4 million dollars. If he is injured, his income will be only 10,000 dollars. The probability that he will be injured is .1 and the probability that he will not be injured is .9. His expected utility is

• A) 3,620 dollars.
• B) 1,810 dollars.
• C) 100,000 dollars.
• D) between 3 and 4 million dollars.
• E) 7,240 dollars.

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Definitions:

T-Distribution

A statistical distribution used when estimating population parameters of a normally distributed population in situations where the sample size is small and the population standard deviation is unknown.

Degrees of Freedom

The count of separate values or amounts assignable to a statistical distribution.

Right Skewed

Describes a distribution where the tail is longer on the right side of the data's peak, indicating a greater number of high-value outliers.

Sampling Distribution

A probability distribution of a statistic obtained through a large number of samples drawn from a specific population.