Exam 14: Managerial Decision-Making Under Uncertainty

-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. Living with this risk gives Bob the same expected utility as if there was no chance of theft and his wealth was

Which of the following sets of outcomes is exhaustive?

Although he is very poor, Al plays the million-dollar lottery everyday because he is certain that one day he will win. Al makes this calculation based upon

If a person is risk neutral, then she

Fair insurance

If Stock A sometimes increases and sometimes decreases in value when Stock B increases in value at the same time, they are

The gambler's fallacy is

Bob invests $75 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

Bob invests $25 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

A stock mutual fund is generally

A jar has 20 red jelly beans and 40 black jelly beans. If you pick a red jelly bean and put it back, what are the odds of picking a black jelly bean next?

If an event is likely to occur, which probability is a reasonable estimate?

Sarah buys little stuffed animals for $5 each. They come in different varieties. If the producer stops making (retires)a certain variety, a stuffed animal of that variety will be worth $100; otherwise it is worth $0. There is 50% chance that any variety will be retired. For the purchase of an individual stuffed animal, what is the value to Sarah of knowing ahead of time whether the variety will be retired?

-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's expected utility is

Framing often causes people to

Which of the following helps to reduce risk?

A(n)________ relates each possible outcome to its probability of occurrence.

A person who is risk neutral will

John's utility from an additional dollar increases more when he has $1,000 than when he has $10,000. From this, we can conclude that John

A stock mutual fund's primary advantage is to allow