Scenario 27-1
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Lisa Has a Utility Function $$U = W ^ { 1 / 2 }$$

question 32

Essay

Scenario 27-1
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Lisa has a utility function
$$U = W ^ { 1 / 2 }$$ where W is Lisa's wealth in millions of dollars and U is the utility she obtains.
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-Refer to Scenario 27-1. Suppose Lisa is faced with a choice between two options. With option A Lisa receives a guaranteed $9 million. With option B Lisa faces a lottery that pays $16 million with probability P and pays $4 million with probability (1-P). Given Lisa's utility function, how high does P need to be before Lisa will prefer option B?

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Definitions:

Short-Term Psychodynamic Therapy

A therapeutic approach that seeks to uncover unconscious patterns and meanings in current psychological processes over a brief period.

Relational Psychoanalytic Therapy

A form of psychodynamic therapy that considers therapists to be active participants in the formation of patients’ feelings and reactions and therefore calls for therapists to disclose their own experiences and feelings in discussions with patients.

Meta-Worry

Worrying about the act of worrying itself, which can exacerbate anxiety and stress levels.

Signs Of Danger

Indications or warnings of potential harm or risk to safety and well-being.