Question
Shawna is a high school student weighing her career options of being an actress or an English teacher. If she goes to college she will
Shawna is a high school student weighing her career options of being an actress or an English teacher.
If she goes to college she will major in English and become an English teacher with a certainty of earning $80K per year.
Alternatively, if she does not go to college, she could be a Hollywood actress with a salary of $10 million annually. Or a small theatre actress who will earn $30K annually.
In acting: probability(Hollywood) = .03,probability(small theatre) = .97
Whichever career she chooses, her utility function is: U(income) = (income)1/2
A.Find the two separate expected values of both the English teacher career and the actress career.Which is greater?
B.Find the two separate expected utilities of both the English career and the actress career.Which is greater?
C.Find the certainty equivalent of the baseball career.Solve the certainty equivalent by math and graph.
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