Question: Question 7 3 pts The diagram below is a modified version of Figure 14.2 in your text. The new red line represents scenario X, within

Question 7 3 pts The diagram below is a modified version of Figure 14.2 in your text. The new red line represents scenario X, within which Irma's wealth is 10 with probability P and 70 with probability 1 - P. Utility, U U(Wealth) U(70) = 140 C 0.1U(10) + 0.9U(70) = 133 U(40) = 120 0.5U(10) + 0.5U(70) = U(26) = 105 U(10) = 70 .......... 10 26 40 10P + 70(1-P) 64 70 Wealth, $ Risk premium = 14 Which of the following best describes scenario X? O Irma's risk premium is smaller with scenario X than the risk premium for the scenario where P = 0.5 and wealth is either 10 or 70. The utility of the expected value for scenario X is 120. The certainty equivalent for scenario X is 10P + 70(1-P) The expected utility for scenario X is less than 133

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