Question: A farmer s hens lay 1000 eggs day which he sells

A farmer’s hens lay 1000 eggs/ day, which he sells for 10 cents each, his sole source of income. His utility function is U = √M, where M is his daily income. Each time a farmer carries eggs in from the hen house, there is a 50 percent chance he will fall and break all the eggs. Assuming he assigns no value to his time, is he better off by carrying all the eggs in one trip or by carrying 500 in each of two trips? (Hint: There are three possibilities when he takes two trips: 1000 broken eggs, 500 broken eggs, and no broken eggs. What is the probability of each of these outcomes?)

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  • CreatedDecember 12, 2014
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