Mary Runs Her Own Small Business, and Has a Utility

question 19

Essay

Mary runs her own small business, and has a utility function for assets of:
U(A) = 22A - .07A²‚ for all 0≤ A ≤ 100, where A denotes total assets in thousands of dollars.
(a) Describe Mary's attitude toward risk.
(b) Assume that Mary's current asset holding are $20,000. Should she accept a business opportunity that has a probability of 0.55 leading to a net profit of $15,000 and a probability of 0.45 leading to a net loss of $15,000?
(c) Assume that Mary's assets are $85,000 instead. Should she now accept the same offer?
(d) Comment on the results of the previous two questions.

Understand the concept of conditioned inhibition and its influence on habit strength.

Comprehend Hull's theory regarding drives and their interaction with habit strength and excitatory potential.

Recognize the significance of homeostasis in motivation and its maintenance through physiological processes.

Distinguish between stimulus-response and associative learning models in terms of flexibility and rigidity.

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Definitions:

Counterproductive Work Behavior

Actions by employees that intentionally hinder organizational goals or objectives.

Organizational Norms

Shared expectations and rules that guide behavior of people within social groups, including workplaces.

Voluntary Behavior

Actions taken by an individual out of free will without external compulsion or coercion.

Organizational Citizenship Behavior

Voluntary actions by employees that are not part of their formal job requirements but contribute to the organizational well-being.