Which lottery do you prefer

Reference no: EM13183470

Your utility if a function of income (i), given by: $U = 10i$ as long as i is less than or equal to 300. If I is greater than 300, your utility is a constant equal to 3,000. Suppose you have a choice between having an income of 300 with certainty and a lottery that makes your income equal to 400 with probability 0.5 and equal to 200 with probability 0.5.

a) Sketch this utility function

b) What is the expected value of each lottery?

c) Which lottery do you prefer?

d) Are you risk averse, risk loving or risk neutral? Explain briefly.

Reference no: EM13183470

Questions Cloud

State what is the concentration of fe : A solution is made by mixing 4.6 mL of 0.274 M Fe(NO3)3 and 656.0 mL of water. What is the concentration of Fe3+ in the resulting solution?

How would this event affect the money supply : Suppose the required reserve ratio were 8 percent of checkable deposits, and the simple deposit multiplier applied. Using negatives to represent a decrease, if the Fed bought $480 of Treasury securities from a bank, the result would be a $ increas..

What is the new concentration of h in the diluted solution : If 482.4 mL of 16.5 M H2SO4 solution is diluted to 5.6 L, what is the new concentration of H+ in the diluted solution?

State the immediately adjacent nitrogen''s lone pairs : in the resonance form caused by the delocalization of the immediately adjacent Nitrogen's lone pairs, there is a pi bond.

Which lottery do you prefer : Your utility if a function of income (i), given by: $U = 10i$ as long as i is less than or equal to 300. If I is greater than 300, your utility is a constant equal to 3,000. Suppose you have a choice between having an income of 300 with c..

Effect of alcohol groups on alcohol solubility in hexanes : The effect of increasing molecular weight (size) on alcohol solubility in water. B. The effect of more alcohol groups on alcohol solubility in hexanes.

Examine the marketing strategies : Examine the marketing strategies used to sell fast food hamburgers and automobiles. identify specific example of classic conditioning, operant conditioning, shaping and discriminative stimuli for each product type

Determine the appropriate discount factors : Determine the appropriate discount factors using tables and Gull Inc. is considering the acquisition of equipment that costs $510,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows

Color-blind an educator : If race is an illusion, why is it so dangerous to be “color-blind” as an educator? How can we work to combat institutional racism in our schools and society?

User Account

All Pages