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Suppose a worker has a choice between taking two jobs. Job 1 yields an income I = 100 with probability 0.25 and an income I
Suppose a worker has a choice between taking two jobs. Job 1 yields an income I = 100 with probability 0.25 and an income I = 9 with probability 0.75. Job 2 yields an income I = 25 with certainty, i.e. probability 1. Our worker of interest has the following utility function: U(x) = . a. Is the worker risk averse, risk neutral, or risk loving? Explain. b. Calculate the expected utility for each job. Does the worker take the first or second job? c. Plot your work from part (b) on a graph. d. Find the risk premium. Identify the risk premium on your graph from part (c)
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