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Author Question: Assume that the utility function of an individual is represented as U = W - 0.001W; where W (his ... (Read 121 times)

pane00

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on: Jun 30, 2018
Assume that the utility function of an individual is represented as U = W - 0.001W; where W (his present wealth) = 250,000 . He considers investing in a gamble which would double his wealth if he wins but still leave him with 250,000 if he loses. Given that his probability of winning is 0.6, calculate his expected utility of taking the bet.
 a. 157 units
  b. 250 units
  c. 207.11 units
  d. 224.3 units

Question 2

In the consumption of public goods
 A) consumers can be excluded.
  B) free riders can be excluded.
  C) consumers cannot be excluded.
  D) government is excluded.


Beatricemm

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Reply #1 on: Jun 30, 2018
Answer to Question 1

D

Answer to Question 2

C


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