Suppose your utility function is represented by U(M)=M^, where M is your annual income.

a)Your current job will pay you $80,000 this year however if you take a different job which pays based on performance, you have a 60% chance of making $120,000 and a 40% chance you'll make $30,000. Should you take the new job or stay with your current job?

b)If you can buy insurance to cover your risky salary with your new job, how much would you be willing to pay?