2. Ronald has $18,000. But he is forced to bet it on the flip of a fair coin. If he wins he has $36,000. If he loses he has nothing. Ronald's expected utility function is 0.5x0.5+ 0.5y0.5, where x is his wealth if heads comes up and y is his wealth if tails comes up. What safe income would make him exactly as well off as this bet?

2. Ronald has $18,000. But he is forced to bet it on the flip of a fair coin. If he wins he has $36,000. If he loses he has nothing. Ronald's expected utility function is 0.5x0.5+ 0.5y0.5, where x is his wealth if heads comes up and y is his wealth if tails comes up. What safe income would make him exactly as well off as this bet?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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