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Suppose the utility function for John is U(I) = I 0.5 , Is John risk-loving? Risk-averse or Risk neutral? Explain. John is a farmer who
- Suppose the utility function for John is U(I) = I 0.5,
- Is John risk-loving? Risk-averse or Risk neutral? Explain.
- John is a farmer who is wondering if he would build a fence to protect his harvest. His harvest will generate $10,000 in income if there are no wild animal attacks. He will lose 75% of his income if there are wild animal attacks. The probability of a wild animal attack is 0.1. (find the expected payoff with no fence)
- A contractor approached John telling him that he can build him a fence to protect his crops. Calculate the maximum amount John is willing to spend to build a fence. (Assume the fence is completely effective and no damages will occur even if there are animal attacks)
- Is John risk-loving? Risk-averse or Risk neutral? Explain.
- John is a farmer who is wondering if he would build a fence to protect his harvest. His harvest will generate $10,000 in income if there are no wild animal attacks. He will lose 75% of his income if there are wild animal attacks. The probability of a wild animal attack is 0.1. (find the expected payoff with no fence)
- A contractor approached John telling him that he can build him a fence to protect his crops. Calculate the maximum amount John is willing to spend to build a fence. (Assume the fence is completely effective and no damages will occur even if there are animal attacks)
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Introduction to Operations Research
Authors: Frederick S. Hillier, Gerald J. Lieberman
10th edition
978-0072535105, 72535105, 978-1259162985
