worker in the nearby city of Geita. Since he is not able to work full-time on the farm, it is more likely that he suffers damages from pests or bad weather. Specifically, the probability of having a GOOD cotton harvest and earning $420 drops to 25%, while the probability of having a BAD harvest and earning only $60 increases to 75%. The individual also earns $60 with certainty as a construction worker (i.e., he earns $60 in addition to his farm income under both a GOOD and a BAD harvest).

(a)What is the expected value of consumption for each activity?

E(1) = (.50)*(420) + (.50)*(60) = 240

E(2) = (1)*(210) = 210

E(3) = (.25)*(420) + (.75)*(60) + 60 = 210

(b)Anubhab, Ed and Javier view risk differently. This is reflected in the differences in their utility functions, which are listed below. Using those utility functions, compute the certainty equivalent (CE), the risk premium (RP) and expected utility (EU) associated with each of the three activities for each individual.

How can you compute the certainty equivalent (CE) with the utility function of 40c-0.05c^2