Sophie is offered a performance based wage that will either be equal to $4,200 or to $3,600, each with a probability of 50%. Sophie says that getting $3,900 for certain would be as good as being offered that random wage. Which, of the following sentences, is true? options: Sophie is risk averse and her risk premium is zero. Sophie is risk neutral and her risk premium is zero. Sophie is risk averse and her risk premium is $300. Sophie is risk neutral and her risk premium is $300.
Sophie is offered a performance based wage that will either be equal to $4,200 or to $3,600, each with a probability of 50%. Sophie says that getting $3,900 for certain would be as good as being offered that random wage. Which, of the following sentences, is true? options: Sophie is risk averse and her risk premium is zero. Sophie is risk neutral and her risk premium is zero. Sophie is risk averse and her risk premium is $300. Sophie is risk neutral and her risk premium is $300.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Sophie is offered a performance based wage
that will either be equal to $4,200 or to $3,600,
each with a probability of 50%.
Sophie says that getting $3,900 for certain
would be as good as being offered that random
wage.
Which, of the following sentences, is true?
options:
Sophie is risk averse and her risk
premium is zero.
Sophie is risk neutral and her risk
premium is zero.
Sophie is risk averse and her risk
premium is $300.
Sophie is risk neutral and her risk
premium is $300.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F409845de-1a58-466f-b5a6-6f427e86b408%2Fb6963cbc-cf3e-439d-9981-c1ca6246cd04%2Fc5z9okk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Sophie is offered a performance based wage
that will either be equal to $4,200 or to $3,600,
each with a probability of 50%.
Sophie says that getting $3,900 for certain
would be as good as being offered that random
wage.
Which, of the following sentences, is true?
options:
Sophie is risk averse and her risk
premium is zero.
Sophie is risk neutral and her risk
premium is zero.
Sophie is risk averse and her risk
premium is $300.
Sophie is risk neutral and her risk
premium is $300.
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