The decision maker has utility function U(x) = 2 ln(x). With 50% probability x=20 and with 50% x=100. The decision maker can buy insurance. For each unit of insurance they buy the get $1 if x=20 realizes. A unit of insurance costs $0.75. How many units of insurance does the decision maker buy?

The decision maker has utility function U(x) = 2 ln(x). With 50% probability x=20 and with 50% x=100. The decision maker can buy insurance. For each unit of insurance they buy the get $1 if x=20 realizes. A unit of insurance costs $0.75. How many units of insurance does the decision maker buy?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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