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Please support to find solution for this question. Thank you. Suppose a person has the utility function u(q) = Inq and wealth w. Now she
Please support to find solution for this question. Thank you.
Suppose a person has the utility function u(q) = Inq and wealth w. Now she has an opportunity ofa bet. With probability m, she wins and receives x > 0 dollars; with probability 1 m, she loses andpays x > O dollars, in which x is the scale of the bet that can be chosen by the person. (l) What's the optimal x for the bet? And what's the relationship between x' and (2) What's the value of x when rr = 0.5. Please explain.
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