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Suppose your utility function is U(w)=In(w). In the first case, you get 50,000 a year for salary. In the second case, you have 50% chance
Suppose your utility function is U(w)=In(w). In the first case, you get 50,000 a year for salary. In the second case, you have 50% chance of getting a promotion and earn $200,000 a year, and 50% of getting fired and receive social security worth of $10,000. Your utility for the uncertain outcome is the weighted average of each case, i.e. Utility=P(promotion).U(earning when you have promotion)+P(fired).U(earning when you are fired). How does your expected utility change going from case 1 to case 2? Decrease by 0.7419 O A. B. Decrease be 0.1116 o C. Increase be 0.1116 D. Increase by 0.7419
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