Problem 06-17 (algo) Amanda has a von Neumann-Morgenstern utility function given by U= √√M, where Mis her income. If she becomes an economics professor, she will make M=81/yr with probability 1. If she becomes an attorney, she will make M = 900/yr if she becomes a partner in a Wall Street firm, but only M=49/yr if she fails to make partner. The probability of her becoming a partner is 0.2. Ellis is an infallible judge of legal talent. After a brief interview, he can state with certainty whether Amanda will become a partner. What is the most Amanda would be willing to pay for this information? (Set up the relevant equation and solve it.) Instructions: Round your answer to 2 decimal places. SA
Problem 06-17 (algo) Amanda has a von Neumann-Morgenstern utility function given by U= √√M, where Mis her income. If she becomes an economics professor, she will make M=81/yr with probability 1. If she becomes an attorney, she will make M = 900/yr if she becomes a partner in a Wall Street firm, but only M=49/yr if she fails to make partner. The probability of her becoming a partner is 0.2. Ellis is an infallible judge of legal talent. After a brief interview, he can state with certainty whether Amanda will become a partner. What is the most Amanda would be willing to pay for this information? (Set up the relevant equation and solve it.) Instructions: Round your answer to 2 decimal places. SA
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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