Oskar's Preferences Over Gambles in Which the Probability of Events

question 32

Multiple Choice

Oskar's preferences over gambles in which the probability of events 1 and 2 are both 1/2 can be represented by the von Neuman-Morgenstern utility function .5y^.5₁ + .5y^.5₂, where y₁ is his consumption if event 1 happens and y₂ is his consumption if event 2 happens.A gamble that allows him a consumption of $9 if event 1 happens and $25 if event 2 happens is exactly as good for Oskar as being sure to have an income of

• A)$12.5.
• B)$9.
• C)$16.
• D)$17.
• E)None of the above.

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Definitions:

Somatic Nervous System

A component of the peripheral nervous system responsible for the voluntary regulation of body movements through skeletal muscles.

Epinephrine

A biochemical substance, also referred to as adrenaline, that functions both as a hormone and a neurotransmitter, playing a pivotal role in initiating the body's fight-or-flight reaction.

Thyroxin

A hormone produced by the thyroid gland that regulates metabolism, energy production, and growth and development.

Melatonin

A substance secreted by the pineal gland that controls the rhythm of sleeping and waking.