6. Derive your own utility function for profit for the range of profits shown in the following table:

Profit Utility Marginal outcome index utility of profit

$1,000 0.0 —

2,000 3,000 3,200 4,000 1.0

a. Find the probability p that would make you indifferent between (1) accepting a risky project with probability p of making $4,000 and probability 1 p of making a profit of $1,000 or (2) making a profit of $2,000 with certainty. Write this probability in the correct blank in the table.

b. Repeat part a for $3,000 and $3,200.

c. Compute the marginal utility of profit. (Hint: MUprofit utility index/ profit, and the denominator, profit, is not constant in this table.)

d. Does your utility index indicate that you have a risk-averse, risk-neutral, or riskloving attitude toward risk? Explain.