Exam 14: Managerial Decision-Making Under Uncertainty

Bob invests $50 in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0. From this information we can conclude that Bob is NOT

A risk-neutral individual will make investment decisions purely based on expected value because

Behavioral economics under uncertainty documents that

People in a certain group have a 0.3% chance of dying this year. If a person in this group buys a life insurance policy for $3,300 that pays $1,000,000 to her family if she dies this year and $0 otherwise, what is the expected value of a policy to the insurance company?

What type of risk behavior does the person exhibit who is willing to pay $5 for the chance to bet $60 on a game where 20% of the time the bet returns $100, and 80% of the time returns $50? Explain.

Your friend Dimitre tells you that he thinks that his favorite basketball team has a 70% chance of winning the next game. This is an example of a(n)

-The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% chance that it could all be stolen. The midpoint of the chord that runs from zero and intersects the utility function where wealth is 100, represents Bob's

Variance is a measure of ________ and the lower the variance, ________.

You draw colored balls out of a bag. You draw a red ball 30% of the time and a blue ball 70% of the time. For each draw, the blue outcome and the red outcome are

Expected value represents

Searching the Internet for information to help select a product that is more reliable is most likely to be done by a

-The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% chance that it could all be stolen. If Bob could keep $50 with certainty, his utility would be

-The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% chance that it could all be stolen. Bob is risk averse because

The certainty effect shows that

A risk premium

Taking actions that reduce risk

A fair game is a game in which the chances are 50-50 that you win or lose.

For a risk-neutral person, the expected utility associated with various levels of wealth

Which of the following games involving the roll of a single die is a fair bet?

What is one reason the federal government might "bail out" farmers in flood prone areas of the country?