Pete's Expected Utility Function Is Pc^1/2₁ + (1 -P)c^1/2₂, Where

question 16

Multiple Choice

Pete's expected utility function is pc^1/2₁ + (1 -p) c^1/2₂, where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂.Pete is offered a choice between getting a sure payment of $Z or a lottery in which he receives $1,600 with probability .80 or $14,400 with probability .20.Pete will choose the sure payment if

• A)Z > 3,136 and the lottery if Z < 3,136.
• B)Z > 8,768 and the lottery if Z < 8,768.
• C)Z > 14,400 and the lottery if Z < 14,400.
• D)Z > 2,368 and the lottery if Z < 2,368.
• E)Z > 4,160 and the lottery if Z < 4,160.

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Definitions:

Quantity

The quantity of a tangible or intangible asset viewed as a single entity or a collective sum.

Graph

A visual representation of data, showing the relationship between variables.

Unit-Profit Margin

The measure of profit derived from each unit of product sold, calculated by subtracting the cost of goods sold from the sales price per unit.

Output

The cumulative output of products or services generated by a corporation, sector, or economic system.