Question 1
Refer to the information provided in Figure 17.1 below to answer the question(s) that follow.
Refer to Figure 17.1. Suppose John's utility from income is given in the figure. From this we would say that John is
◦ risk-neutral.
◦ risk-averse.
◦ risk-loving.
◦ a risk taker.
Question 2
Refer to the information provided in Figure 17.1 below to answer the question(s) that follow.
Refer to Figure 17.1. Dmitri has two job offers when he graduates from college. Dmitri views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $40,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of $40,000. Dmitri believes that he has a 50-50 chance of earning the bonus. Dmitri's expected value from the first job offer is ________ and is ________ from the second job offer.
◦ $40,000; $60,000
◦ $40,000; $40,000
◦ $40,000; $50,000
◦ $20,000; $40,000
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