Multiple Choice
Suppose Lily's indifference curves are defined as U = √FS + √FH, where FS is consumption during sunny weather and FH is consumption during a hurricane.Lily receives 64 units of food when it is sunny and 16 units of food when there is a hurricane.What is the risk premium if the probability of sunshine is Π = 0.5?
A) 4
B) 6
C) 12
D) 16
Correct Answer:
Verified
Correct Answer:
Verified
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