4. A manager’s utility function for profit is U( ) 20 , where is the dollar amount of profit. The manager is considering a risky decision with the four possible profit outcomes shown here. The manager makes the following subjective assessments about the probability of each profit outcome:

Profit Probability outcome 0.05 $10,000 0.45 2,000 0.45 4,000 0.05 20,000

a. Calculate the expected profit.

b. Calculate the expected utility of profit.

c. The marginal utility of an extra dollar of profit is .

d. The manager is risk because the marginal utility of profit is .