Willy's Only Source of Wealth Is His Chocolate Factory

question 18

Multiple Choice

Willy's only source of wealth is his chocolate factory.He has the utility function pc^1/2_f + (1 - p) c^1/2_nf, where p is the probability of a flood, 1 - p is the probability of no flood, and c_f and c_nf are his wealth contingent on a flood and on no flood, respectively.The probability of a flood is p = 1/20.The value of Willy's factory is $300,000 if there is no flood and 0 if there is a flood.Willy can buy insurance where if he buys $x worth of insurance, he must pay the insurance company $4x/23 whether there is a flood or not, but he gets back $x from the company if there is a flood.Willy should buy

• A)enough insurance so that if there is a flood, after he collects his insurance, his wealth will be 1/5 of what it would be if there is no flood.
• B)enough insurance so that if there is a flood, after he collects his insurance, his wealth will be 1/16 of what it would be if there is no flood.
• C)no insurance since the cost per dollar of insurance exceeds the probability of a flood.
• D)enough insurance so that if there is a flood, after he collects his insurance, his wealth will be the same whether there is a flood or not.
• E)enough insurance so that if there is a flood, after he collects his insurance, his wealth will be 1/9 of what it would be if there is no flood.

Develop a clear understanding of correlation, including the interpretation of its direction and strength.

Distinguish between different research methods used in psychology and their applications.

Comprehend the significance of random assignment and its role in experimental design.

Identify the differences between psychologists and psychiatrists, including their methods and philosophies.

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Definitions:

Content analysis

A systematic method of analyzing media content or communication artifacts by categorizing content into groups for further statistical or thematic evaluation.

Content Analysis

Systematic analysis of recorded communications.

Psychobiography

A genre of literature that analyzes the psychological aspects and life experiences of a person.

Naturalistic Observation

A research method where subjects are observed in their natural environment without interference from the researchers.