Exhibit 14.7 The Following Questions Use the Information Below

question 110

Multiple Choice

Exhibit 14.7
The following questions use the information below.
A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45.
-Refer to Exhibit 14.7. What is the decision maker's risk premium for this problem?

• A) −$20,000
• B) −$25,900
• C) $70,000
• D) $80,000

---

Definitions:

Marginal Utility

The extra pleasure or benefit gained by a consumer from using one more unit of a product or service.

Total Utility

The absolute gratification obtained from the utilization of a designated complete quantity of a good or service.

Total Utility

The total satisfaction received from consuming a certain amount of a good or service.

Marginal Utility

The supplementary value or usefulness experienced from consuming one more unit of a good or service.