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T. {20 points] Forecasters predict there is a 25 percent probability that the upcoming growing season will be a drought. Assume that Farmer Anna is
T. {20 points] Forecasters predict there is a 25 percent probability that the upcoming growing season will be a drought. Assume that Farmer Anna is an e:vtpecl:=.-zrl-utilit},r maximize-r with utility,r function U{w) = {mu-5. Her initial wealth is $0. Anna initially has the choice between two crops: potatoes or strawberries. If she plants all potatoes, her payoff is $5000 if there is normal rain and $40,000 if there is a draught. If she plants all strawberries, her payoff is $20,000 if there is normal rain and $12,000 if there is a draught. Which crop rnix should Anna choose: (1} all strawberries; {2] all potatoes; (3} three quarters strawberries and one quarter potatoes; or (4) one quarter strawberries and three quarters potatoes
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