An individual has a vNM utility function of money of U(x) = x^1/2, where x is her change in wealthy.

| November 24, 2016

An individual has a vNM utility function of money of U(x) = x^1/2, where x is her change in wealthy. She can choose between the following lotteries:

1: Receive 0Receive 100 with a 40% probability.

2. Receive 1600 with a 50% probability. Receive 400 with a 50% probability.

Which statement is true?

If x> 4900 she will choose 1. If it’s less than 4900, she’ll choose 2.

If x> 3000 she will choose 1. If it’s less than 3000, she’ll choose 2.

If x> 70 she will choose 1. If it’s less than 70, she’ll choose 2.

She will never choose lottery one.

I’m completely lose with this problem. Thank you so much!

Get a 30 % discount on an order above $ 5
Use the following coupon code:
CHRISTMAS
Order your essay today and save 30% with the discount code: CHRISTMASOrder Now
Positive SSL