(See Problem 11. )Pete's expected utility function is pc1/21 + (1-p)c1/22,where p is the probability that he consumes c1 and 1 - p is the probability that he consumes c2.Pete is offered a choice between getting a sure payment of $Z or a lottery in which he receives $1,600 with probability .80 or $14,400 with probability .20.Pete will choose the sure payment if

A) Z $\gt$ 3,136 and the lottery if Z $\lt$ 3,136. B) Z $\gt$ 8,768 and the lottery if Z $\lt$ 8,768. C) Z $\gt$ 14,400 and the lottery if Z $\lt$14,400. D) Z $\gt$ 2,368 and the lottery if Z $\lt$2,368. E) Z $\gt$ 4,160 and the lottery if Z $\lt$4,160. A) Z $\gt$ 3,136 and the lottery if Z $\lt$ 3,136. B) Z $\gt$ 8,768 and the lottery if Z $\lt$ 8,768. C) Z $\gt$ 14,400 and the lottery if Z $\lt$14,400. D) Z $\gt$ 2,368 and the lottery if Z $\lt$2,368. E) Z $\gt$ 4,160 and the lottery if Z $\lt$4,160.

Sally Kink is an expected utility maximizer with utility function pu(c1)+ (1 -p)u(c2),where for any x $\lt$ 7,000,u(x)= 2x,and for x greater than or equal to 7,000,u(x)=14,000 + x.

A) Sally will be risk averse if her income is less than $7,000 but risk loving if her income is more than $7,000. B) Sally will be risk neutral if her income is less than $7,000 and risk averse if her income is more than $7,000. C) Sally will never take a bet if there is a chance that it leaves her with wealth less than $14,000. D) For bets that involve no chance of her wealth exceeding $7,000,Sally will take any bet that has a positive expected net payoff. E) None of the above. A) Sally will be risk averse if her income is less than $7,000 but risk loving if her income is more than $7,000. B) Sally will be risk neutral if her income is less than $7,000 and risk averse if her income is more than $7,000. C) Sally will never take a bet if there is a chance that it leaves her with wealth less than $14,000. D) For bets that involve no chance of her wealth exceeding $7,000,Sally will take any bet that has a positive expected net payoff. E) None of the above.

(See Problem 11. )Lawrence's expected utility function is pc1/21 + (1 -p)c1/22,where p is the probability that he consumes c1 and 1 - p is the probability that he consumes c2.Lawrence is offered a choice between getting a sure payment of $Z or a lottery in which he receives $400 with probability .30 or $2,500 with probability .70.Lawrence will choose the sure payment if

A) Z $\gt$ 1,040.50 and the lottery if Z $\lt$1,040.50. B) Z $\gt$ 2,500 and the lottery if Z$\lt$ 2,500. C) Z $\gt$ 2,090.50 and the lottery if Z$\lt$2,090.50. D) Z $\gt$ 1,681 and the lottery if Z $\lt$1,681. E) Z $\gt$1,870 and the lottery if Z $\lt$ 1,870. A) Z $\gt$ 1,040.50 and the lottery if Z $\lt$1,040.50. B) Z $\gt$ 2,500 and the lottery if Z$\lt$ 2,500. C) Z $\gt$ 2,090.50 and the lottery if Z$\lt$2,090.50. D) Z $\gt$ 1,681 and the lottery if Z $\lt$1,681. E) Z $\gt$1,870 and the lottery if Z $\lt$ 1,870.

Exam 12:Uncertainty-Part B

(See Problem 11. )Pete's expected utility function is pc^1/2₁ + (1-p)c^1/2₂,where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂.Pete is offered a choice between getting a sure payment of $Z or a lottery in which he receives $1,600 with probability .80 or $14,400 with probability .20.Pete will choose the sure payment if

(Multiple Choice)

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Question 21

Clancy has $1,800.He plans to bet on a boxing match between Sullivan and Flanagan.He finds that he can buy coupons for $9 each that will pay off $10 each if Sullivan wins.He also finds in another store some coupons that will pay off $10 if Flanagan wins.The Flanagan tickets cost $1 each.Clancy believes that the two fighters each have a probability of 1/2 of winning.Clancy is a risk averter who tries to maximize the expected value of the natural log of his wealth.Which of the following strategies would maximize his expected utility?

(Multiple Choice)

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Question 22

Sally Kink is an expected utility maximizer with utility function pu(c₁)+ (1 -p)u(c₂),where for any x $\lt$ 7,000,u(x)= 2x,and for x greater than or equal to 7,000,u(x)=14,000 + x.

(Multiple Choice)

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Question 23

(See Problem 11. )Lawrence's expected utility function is pc^1/2₁ + (1 -p)c^1/2₂,where p is the probability that he consumes c₁ and 1 - p is the probability that he consumes c₂.Lawrence is offered a choice between getting a sure payment of $Z or a lottery in which he receives $400 with probability .30 or $2,500 with probability .70.Lawrence will choose the sure payment if

(Multiple Choice)

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Question 24

Showing 21 - 24 of 24

Exam 12:Uncertainty-Part B

Sally Kink is an expected utility maximizer with utility function pu(c1)+ (1 -p)u(c2),where for any x <\lt< 7,000,u(x)= 2x,and for x greater than or equal to 7,000,u(x)=14,000 + x.

Demand-Part A

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics-Part A

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters

Sally Kink is an expected utility maximizer with utility function pu(c₁)+ (1 -p)u(c₂),where for any x $\lt$ 7,000,u(x)= 2x,and for x greater than or equal to 7,000,u(x)=14,000 + x.