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QUESTION 7 Homer has a wealth of 5 and his utility function for money is: U(M)=(1-1/M). He has an accident on his job and is
QUESTION 7 Homer has a wealth of 5 and his utility function for money is: U(M)=(1-1/M). He has an accident on his job and is planning to sue his employer. He could win with a probability of 0.5 and get damages of 6. If he loses, he will get no damages. Moe is a risk-neutral lawyer who has an opportunity cost of 2 and who can help Homer to file a case. (a) Will Homer sue if Moe charges 2 to cover his opportunity cost? (b) Can Moe offer a fee schedule that can induce Homer to sue? If so, determine this schedule. Attach File Browse Local Files Browse Content Collection
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