A consumer who has $1000 is represented by the expected utility function u(x) = ?x. A lottery

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A consumer who has $1000 is represented by the expected utility

function u(x) = ?x. A lottery ticket is sold at $80 whose prize is $10000

with probability 1/10 and zero with probability 9/10

Find the certainty equivalent of the lottery ticket. Find the risk premium of the lottery ticket. Should this consumer buy the ticket? Why?

Related Book For answer-question

Microeconomics An Intuitive Approach with Calculus

ISBN: 978-0538453257

1st edition

Authors: Thomas Nechyba

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Posted Date: Feb 16, 2024 12:22 AM

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A consumer who has $1000 is represented by the expected utility function u(x) = ?x. A lottery

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Certainty Equivalent Given the consumers expected utility function ux sqrtx and the lotterys details ... View the full answer

Microeconomics An Intuitive Approach with Calculus

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