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

question 14

Multiple Choice

Wilfred'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.Wilfred is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2,500 with probability .40 or $6,400 with probability .60.Wilfred will choose the sure payment if

• A)Z > 4,624 and the lottery if Z < 4,624.
• B)Z > 3,562 and the lottery if Z < 3,562.
• C)Z > 5,512 and the lottery if Z < 5,512.
• D)Z > 6,400 and the lottery if Z < 6,400.
• E)Z > 4,840 and the lottery if Z < 4,840.

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