Consumer A has an expected utility function with u(x) = x, while consumer B has u(x)...

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Consumer A has an expected utility function with u(x) = x², while consumer B has u(x) = x0.5. A gamble will pay $50 with prob. 0.3 and $0 with prob. 0.7. a. Find the expected value of the gamble for consumer A and B. b. What fixed amount of money, with no risk, gives consumer B the same expected utility as the gamble? c. Say that consumer A now has $100 of certain wealth. This consumer has the option to buy this gamble at an upfront cost of $22. Will the consumer purchase the gamble (and its cash flows), or decline this opportunity and just keep her $100? (Show work) Consumer A has an expected utility function with u(x) = x², while consumer B has u(x) = x0.5. A gamble will pay $50 with prob. 0.3 and $0 with prob. 0.7. a. Find the expected value of the gamble for consumer A and B. b. What fixed amount of money, with no risk, gives consumer B the same expected utility as the gamble? c. Say that consumer A now has $100 of certain wealth. This consumer has the option to buy this gamble at an upfront cost of $22. Will the consumer purchase the gamble (and its cash flows), or decline this opportunity and just keep her $100? (Show work)

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a Find the expected value of the gamble for consumer A and B ANSWER For consumer A the expected value of the gamble is 0350 070 15 For consumer B the ... View the full answer