Risk and Insurance.

Kelly is a farmer with zero wealth. She can either plant rice or cotton. If she plants cotton, Kelly earns an income of $1800 if the weather is GOOD, and $0 if the weather is BAD. If she plants rice, Kelly will earn an income of $1000 under both GOOD and BAD weather. The probability of GOOD weather is 0.7. The probability of BAD weather is 0.3. Kelly's utility function is u(c) = 3Vc, where c is the value of consumption. Use this information to fill out the following table for Kelly. Table 1 Kelly's... Plant Rice Plant Cotton Expected Value of Income Expected Utility Certainty Equivalent Risk Premium a. What type of risk preferences does Kelly have? Justify your answer. b. Which crop will Kelly choose to plant? Justify your