Sppose annrsquos utility function is defined as uc lnc , Ask an Expert

Economics

Suppose Ann’s utility function is defined as: u(c) = ln(c) . For her birthday, Ann’s father offers her the choice of either a lottery ticket that is worth $1 with probability .99 and worth $100,000 with probability .01 or $500 cash.

a. What is the expected value of the lottery ticket?

b. What is Ann's expected utility if she chooses the lottery ticket?

c. What does Ann choose?

d. Is Ann risk averse?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91571016

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