If one of the students takes the risky job, how much more would the fruit-picking job have
Question:
Two students, Jim and Kim, are offered summer jobs managing a student house-painting business. There is a 50 percent chance that either of them will be successful and end up with $21,000 of wealth to get them through the next school year. But there is also a 50 percent chance that either will end up with only $3,000 of wealth. Each could take a completely safe but back-breaking job picking fruit that would leave them with a guaranteed $9,000 at the end of the summer. The table in the next column shows Jim€™s and Kim€™s utility of wealth schedules.
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Jim takes the risky job His expected utility with the risky job is 390 T...View the full answer
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