Course: Microeconomics - Insurance Market - Choice under Uncertainty Suppose a farmer whose utility function is given by U = Ln(I) ("Ln" is natural logarithm and I is income). The farmer owns one hectare of land and must decide which crop to plant. The yield in ($) of the crops will depend on whether or not there is a rainy year ("states of nature") and is summarized in the following table:

Product	Non Rainy Year	Rainy Year
Wheat	$35,000	$15,000
Corn	$20,000	$30,000

The farmer believes that the probability of a rainy year is 50%. a) Calculate the expected value of the farmer's income if he decides to plant exclusively wheat or exclusively corn. b) If he is obliged to plant only ONE crop, which one would it be? c) Suppose the farmer can divide his land between both crops. What proportion would he grow wheat and what proportion corn?

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