Billy Has a Von Neumann-Morgenstern Utility Function U(c)= C^1/2

question 7

Multiple Choice

Billy has a von Neumann-Morgenstern utility function U(c) = c^1/2.If Billy is not injured this season, he will receive an income of 16 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)3,610 dollars.
• B)7,220 dollars.
• C)100,000 dollars.
• D)between 15 and 16 million dollars.
• E)14,440 dollars.

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Definitions:

Progressive

Describes policies or ideologies favoring social reform, innovation, and gradual improvements over time, often in the context of taxation, societal change, or politics.

Regressive

Refers to policies or measures that disproportionately affect those with lower incomes, often making them bear a larger relative burden.

Proportional

A relationship between two quantities where the ratio remains constant.

Payroll Taxes

Charges assessed on employers and their workers, based on a percentage of the compensation paid to employees.