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.Brandon's risk premium is:
A) 250 units of water.
B) 325 units of water.
C) 17.5 units of water.
D) 18.75 units of water.
Correct Answer:
Verified
Correct Answer:
Verified
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