Question: Suppose that a decision maker's utility as a function of her wealth, x , is given by U ( x ) = ln( x) (ln

Suppose that a decision maker's utility as a function of her wealth,x, is given byU(x) = ln(x)(ln is the natural logarithm ofx).

The decision maker now has $15,000 and two possible decisions. For decision 1, she gains $5,000 for certain. For decision 2, she loses $4,000 with probability 0.2, but gains $7,000 with probability 0.8. Which decision maximizes the expected utility of her net wealth?

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