Fervent iowa state university cyclone basketball fan

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Mary is a fervent Iowa State University Cyclone Basketball fan.  She derives utility as a function of the ISU team winning the Big XII championship and from income according to the function where and w is her level of wealth.  Mary believes the probability of a Cyclone championship is

Mary has been offered the following "insurance policy."  The insurance policy costs $16.  If the Cyclones win the championship, she pays only the policy cost of $16.  If the Cyclones lose, she will receive $21.50 (so that after taking into account the policy cost of $16, her net return is $5.50).  Will Mary's expected utility increase if she purchases the policy?

Reference no: EM131777019

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