An individual has a von Neumann-Morgensternutility function of the form u(w) = Vw. What would theindividual be willing to pay for a lottery that pays$1,000,000 with a probability of 0.0015 and zerootherwise?

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

Answered: a tern utility function of the form…

a tern utility function of the form u(w) = Vw. What would the ndividual be willing to pay for a lottery that pays %3D 51,000,000 with a probability of 0.0015 and zero otherwise?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

An individual has a von Neumann-Morgenstern
utility function of the form u(w) = Vw. What would the
individual be willing to pay for a lottery that pays
$1,000,000 with a probability of 0.0015 and zero
otherwise?

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