An individual is offered a choice of either $50 or a lottery which may result in $0 or $100, each with equal probability 1/2. If the individual has a utility function u(w) = w, which one would they choose? If the individual has a utility function u(w) =sqr(w)?

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A: Answers. Part - 1  By dividing the utility gained from each conceivable outcome by the corresponding…

Q: Zac has a current wealth of £400. He gets an email offering him the chance to enter a prize draw…

A: Answer: Given, Current wealth=£400Chance of winning £500=25%Chance of winning £0=75% Let us first…

Q: **Practice**

A: a) The values of the possible outcomes of the lotteries, the corresponding probabilities, and…

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A:

Q: Define the risk premium p = č - Cce where č level of consumption from the lottery (7 = E[c]).…

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Q: A consumer has utility u(I) = VI and income $1,000. When sick, the consumer must go to the doctor,…

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Q: Gary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary's boat…

A: Not taking the gamble gives the $80 as an utility to gary.

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Q: Consider the following utility functions: U1(x) = e"; U2(x) = x°, where a > 0 and BE (0, 1); U3(x) =…

A: Graph of

Q: amount of money Person A owns. Person B's utility function is ug(Xg, 1s)= 3x8 starts with an…

A: The option is C. None of the other answer. Reason-:Give that,Person A smokes and Person B…

Q: 4. An individual's Bernoulli utility function is u(w) = √w, and the individual has initial wealth…

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Q: Suppose that Mike, with utility function, u(x) = / <+5000, is offered a gamble where a coin is…

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Q: f Kelly is first given $1000, she strictly prefers lottery A=$500 over lottery B=($0,0.5;…

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Q: Anna is risk averse and has a utility function of the form u(w) pocket she has €9 and a lottery…

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Q: Fund-raising party. Each of the 1,200 participants at a fund-raising event can choose a raffle…

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Q: Let's denote a lottery as (X₁, P1; X2, P2; ... ; Xm, Pm), where Xi and Pi indicate the reward…

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Q: a tern utility function of the form u(w) = Vw. What would the ndividual be willing to pay for a…

A: As it is given lottery pay =$1,000,000 probability =0.0015

Q: 12. A consumer who conforms to the von Neumann-Morgenstern axioms is faced with four situations A,…

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Q: An individual's Bernoulli utility function is u(w) = √w, and the individual has initial wealth 100.…

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Q: Donna just paid $800 for a new iPhone. Apple offers a two year extended warranty for $200 and Donna…

A: here we can find the minimum probability and Donna Decision as follow-

Q: A driver's wealth $100,000 includes a car of $20,000. To install a car alarm costs the driver…

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Q: Sadija has a concave utility function of U(W) = In(W). She has inherited a ring from a relative, but…

A: Part a: ln (W) = 1/3 ln(6000) + 2/3ln(3000) ln(W) = 8.69951474821(1/3) + 8.00636756765(2/3) ln(W) =…