What is his average or expected utility in numerical terms

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Once again consider a worker who has a utility function U = √ Y. In a good week he earns $25 and in a bad week he earns nothing. Good and bad weeks each have probabilities of 50%.

(a) What is his average or expected utility in numerical terms?

(b) Suppose the government enters the picture and requires him to contribute to an unemployment insurance scheme. He must pay $9 every time he has a good week. In return the government pays him $9 whenever he has a bad week. Compute his average or expected utility with the new insurance scheme in place.

Reference no: EM131072429

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