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Assume Brandon's Benefit Function for Water Is S(W)= √W and He

Question 19

Multiple Choice

Assume Brandon's benefit function for water is S(W) = √W and he consumes water both in droughts,WD,or in the rainy season,WR.Assume his current consumption bundle is WD = 400 and WR = 100 and the probability of drought is 0.75.Expected water consumption is:


A) 500.
B) 250.
C) 325.
D) 175.

Correct Answer:

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