Suppose your utility function for income that takes the form U(= , and you are considering a self-employment opportunity that may pay $10,000 per year or $40,000 per year with equal probabilities. What certain income would provide the same satisfaction as the expected utility from the self-employed position?
A. $15,000
B. $22,500
C. $25,000
D. $27,500
Answer:B
Suppose your utility function for income that takes the form U(= , and you are considering a self-employment opportunity that may pay $10,000 per year or $40,000 per year with equal probabilities. What certain income would provide the same satisfaction as the expected utility from the self-employed position?
A. $15,000 B. $22,500 C. $25,000 D. $27,500