The following table shows the relationship between your wealth (in thousands ofdollars) and your utility:WealthUtility.15.01023.01530.02036.02541.03046.03550.0You can invest in asset A, which offers a riskless payoff of $15,000 or in asset B, whichpays $5,000 with 40% probability and $25,000 with 60% probaility. Which investmentdo you choose?A. B, because its expected utility of 31.6 is greater than the utility of A.O B. A, because it is riskless.OC. A, because its utility is greater than the expected utility of B, which is 28.4.O D. B, because its expected utility of 30.6 is greater than the utility of A.

In economics, the term "utility" describes the overall enjoyment or gain from consuming a good or…

You can invest in asset A, which offers a riskless payoff of $15,000 or in asset B, which pays $5,000 with 40% probability and $25,000 with 60% probability. Which investment do you choose? A. B, because its expected utility of 31.6 is greater than the utility of A. O B. A, because it is riskless. OC. A, because its utility is greater than the expected utility of B, which is 28.4. O D. B, because its expected utility of 30.6 is greater than the utility of A.

You can invest in asset A, which offers a riskless payoff of $15,000 or in asset B, which pays $5,000 with 40% probability and $25,000 with 60% probability. Which investment do you choose? A. B, because its expected utility of 31.6 is greater than the utility of A. O B. A, because it is riskless. OC. A, because its utility is greater than the expected utility of B, which is 28.4. O D. B, because its expected utility of 30.6 is greater than the utility of A.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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