SOLVED

   61) In the figure above, Lourdita faces a 0.5 probability of receiving $3,000 and a 0.5 probability of receiving $9,000. Her cost of bearing this risk is the distance from A) A to F. B) A to D. C) B to E. D) C to E. 62) The above figure shows how an individual evaluates a bet in which he or she has a 0.5 probability of receiving $20 and a 0.5 probability of receiving $200. The individual would be indifferent between A) $110 with certainty or the expected value of the bet. B) $80 with certainty or the expected value of the bet. C) $200 with certainty or the expected value of the bet. D) $20 with certainty or the expected value of the bet. 63) Adriana wants to try working as an independent contractor this summer. She has a 50 percent chance that she will make $9,000 and 50 percent chance that she will make nothing. Her utility of wealth curve is shown in the figure above. What’s Adriana’s expected utility from taking this job? A) 45 B) $4,500 C) $2,000 D) 40 64) Adriana wants to try working as an independent contractor this summer. She has a 50 percent chance that she will make $9,000 and 50 percent chance that she will make nothing. Her utility of wealth curve is shown in the figure above. What minimum fixed salary should another employer offer Adriana to persuade her to work for his firm? A) $1,001 B) $2,001 C) $3,001 D) $4,501 65) Adriana wants to try working as an independent contractor this summer. She has a 50 percent chance that she will make $9,000 and 50 percent chance that she will make nothing. Her utility of wealth curve is shown in the figure above. What’s Adriana’s cost of risk? A) $2,500 B) $2,000 C) zero D) $40 66) Bobby is offered a job as a salesperson in which there is a 50 percent chance that he will make $2,000 and a 50 percent chance that he will make $10,000. Bobby’s utility of wealth curve is shown in the figure above. What is Bobby’s expected income from taking this job? A) $4,000 B) $6,000 C) $2,000 D) $10,000 67) Bobby is offered a job as a salesperson in which there is a 50 percent chance that he will make $2,000 and a 50 percent chance that he will make $10,000. Bobby’s utility of wealth curve is shown in the figure above. What is Bobby’s expected utility from taking this job? A) 40 B) 50 C) 60 D) 70 68) Bobby is offered a job as a salesperson in which there is a 50 percent chance that he will make $2,000 and a 50 percent chance that he will make $10,000. Bobby’s utility of wealth curve is shown in the figure above. What is Bobby’s cost of risk? A) $1,000 B) $2,000 C) $3,000 D) $4,000 69) Bobby is offered two fulltime jobs. In the first job, as a salesperson, he has a 50 percent chance to make $2,000 a month and a 50 percent chance to make $10,000 a month. The second job, as a construction worker, pays $4,500 a month with certainty. Bobby’s utility of wealth curve is shown in the figure above. Bobby will take the ________ job because his expected ________ from this job is greater. A) first; utility B) second; utility C) second; income D) first; income 70) Erika’s utility with $3,000 of wealth is 6,000 and her utility with $3,001 of wealth is 6,005. Her marginal utility from gaining the additional $1 of wealth is ________. A) 6,005 B) 3,001 C) 6,000 D) 5 71) If Al is risk averse, as his wealth increases, his total utility of wealth ________ and his marginal utility of wealth ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases 72) Soran is risk averse. If her wealth rises by $100, her total utility increases by 300. If her wealth increases, her total utility will decrease A) by more than 300. B) by less than 300. C) by 300. D) by some amount that cannot be determined without more information.