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

question 15

Multiple Choice

Lawrence'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.Lawrence 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.Lawrence will choose the sure payment if

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

---

Definitions:

Senior Management

Refers to the highest level of managerial personnel who are responsible for the strategic direction and overall operations of an organization.

Past Performance

This term refers to the historical results or achievements of an individual or organization, often used as an indicator for future success.

CEO

Chief Executive Officer, the highest-ranking person in a company or organization, responsible for overall management.

Sales Budget

One of the major elements of the income statement budget that indicates the quantity of estimated sales and the expected unit selling price.