(See Problem 11.) Jonas’s expected utility function is pc 1/2 1 + (1 - p ) c 1/2
ID: 2496653 • Letter: #
Question
(See Problem 11.) Jonas’s expected utility function is pc1/21 + (1 - p)c1/22, where p is the probability that he consumes c1 and 1 - p is the probability that he consumes c2. Jonas is offered a choice between getting a sure payment of $Z or a lottery in which he receives $3,600 with probability .10 or $6,400 with probability .90. Jonas will choose the sure payment if
Z > 4,842 and the lottery if Z < 4,842.
Z > 6,242 and the lottery if Z < 6,242.
Z > 6,084 and the lottery if Z < 6,084.
Z > 6,120 and the lottery if Z < 6,120.
Z > 6,400 and the lottery if Z < 6,400.
a.Z > 4,842 and the lottery if Z < 4,842.
b.Z > 6,242 and the lottery if Z < 6,242.
c.Z > 6,084 and the lottery if Z < 6,084.
d.Z > 6,120 and the lottery if Z < 6,120.
e.Z > 6,400 and the lottery if Z < 6,400.
Explanation / Answer
Answer is C
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