The individual pictured in Figure 5.2.3: O would receive a utility of 12 from a sure $6000. would receive a utility of 18 from a sure $6000. O prefers a sure $6000 to a 50% chance of $4000 and a 50% chance of $8000. has an expected utility of 12 from a 50% chance of $4000 and a 50% chance of $8000.

Becky is deciding whether to purchase an insurance for her home againtst burglary. the payoff for her is shown as follow: Net worth of her Net worth of her home: $ 20000 burglary(10%) Net worth of her Net worth of her home: $50000 burglary (90%) The insueance would cover all the loss from burlary and the insurance fee is $8000. Her utility funtion is given as u=w ^0.3 Should Beck purchase the insurance Explain.

Q5

Question 4 Suppose that there is a 10% chance Ja'Marr is sick and earns $10,000, and a 90% chance he is healthy and will earn $70,000. Suppose further that his utility function is the following (utility = square root of income) U (I) = VIncome Ja'Marr's expected income is O $60,000 O $70,000 $40,000 O $64,000