Asked by
Olubunmi Oluwashola
on Nov 05, 2024
Verified
Refer to Table 17.5. Lucy earns $20,000 annually. She has the opportunity to bet her entire salary on the upcoming super bowl. If Lucy takes the bet, she will pick the Packers. She believes that the Packers have a 50-50 chance of winning the game. If the Packers win, Lucy will double her money ($40,000) but if they lose she loses her entire salary ($0) . Lucy's utility if she does not take the bet is
A) 20 and her expected utility from the bet is 40.
B) 20 and her expected utility from the bet is 20.
C) 20 and her expected utility from the bet is 0.
D) 40 and her expected utility from the bet is 10.
Expected Utility
A concept in economics and game theory that predicts the utility an individual can expect when faced with uncertain outcomes.
- Compute anticipated utility to support decision-making under uncertainty.
- Ascertain levels of utility from provided income figures.
Verified Answer
SB
Learning Objectives
- Compute anticipated utility to support decision-making under uncertainty.
- Ascertain levels of utility from provided income figures.