(Appendix). Thomas’s utility function isHe has two job offers. One is in an industry in which there are no layoffs and the annual pay is $40,000. In the other industry, there is uncertainty about layoffs. Half the years are bad years, and layoffs push Thomas’s annual pay down to $22,500. The other years are good years. How much must Thomas earn in the good years in this job to compensate him for the high risk of layoffs?

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U = VY,where Y = annual income.