Consider the setup from Question 1 and 2. Sam has another idea: They buy two tickets (that have independent outcomes) and share the costs and proceeds equally. Is this better than buying no tickets? O a. Yes, Sam's solution is preferable to buying no ticket. O b. Yes, Sam's solution is inferior to buying no ticket. O c. Both Janet and Sam would be indifferent between pooling their risk and buying no ticket. O d. There is not enough information to answer this question.
Consider the setup from Question 1 and 2. Sam has another idea: They buy two tickets (that have independent outcomes) and share the costs and proceeds equally. Is this better than buying no tickets? O a. Yes, Sam's solution is preferable to buying no ticket. O b. Yes, Sam's solution is inferior to buying no ticket. O c. Both Janet and Sam would be indifferent between pooling their risk and buying no ticket. O d. There is not enough information to answer this question.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer question on screenshot (which of the folowing statements....)
q1) Janet offers her friend Sam (who has identical preferences and initial wealth) the following proposition: They buy the ticket together, and share the cost and proceeds equally.
Transcribed Image Text:Consider the setup from Question 1 and 2. Sam has another idea: They buy two tickets (that have independent outcomes) and share the costs
and proceeds equally.
Is this better than buying no tickets?
O a. Yes, Sam's solution is preferable to buying no ticket.
O b. Yes, Sam's solution is inferior to buying no ticket.
O c. Both Janet and Sam would be indifferent between pooling their risk and buying no ticket.
O d. There is not enough information to answer this question.
Transcribed Image Text:Recall Janet's proposal from Question 2 and Sam's solution from Question 3. Which of the following statements is true?
O a. There are risk averse expected utility maximisers who would prefer Janet's idea to Sam's idea.
O b. Any expected utility maximiser whose utility is a strictly increasing function of wealth would prefer Sam's idea to Janet's idea.
O c. Any risk averse expected utility maximiser would prefer Sam's idea to Janet's idea.
O d. Any expected utility maximiser would be indifferent between Janet's idea and Sam's idea.
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