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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 0.5x5 + 0.5y5 where x is his consumption if event 1 happens and y 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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Show that these choices are inconsistent with expected utility maximization.
q1. select two products or services with which you are familiar - one produced in the u.s. and the other produced in
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