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

question 21

Multiple Choice

Albert'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.Albert is offered a choice between getting a sure payment of $Z or a lottery in which he receives $400 with probability .30 or $2,500 with probability .70.Albert will choose the sure payment if

• A)Z > 2,090.50 and the lottery if Z < 2,090.50.
• B)Z > 1,040.50 and the lottery if Z < 1,040.50.
• C)Z > 2,500 and the lottery if Z < 2,500.
• D)Z > 1,681 and the lottery if Z < 1,681.
• E)Z > 1,870 and the lottery if Z < 1,870.

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