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A consumer who has $1000 is represented by the expected utility function u(x) = ?x. A lottery ticket is sold at $80 whose prize is
A consumer who has $1000 is represented by the expected utility
function u(x) = ?x. A lottery ticket is sold at $80 whose prize is $10000
with probability 1/10 and zero with probability 9/10
Find the certainty equivalent of the lottery ticket. Find the risk premium of the lottery ticket. Should this consumer buy the ticket? Why?
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Certainty Equivalent Given the consumers expected utility function ux sqrtx and the lotterys details ...
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
