The decision maker has utility function U(x) = 2 In(x). With 50% probability x=20 and with 50% x=100. The decision maker can buy insurance. For each unit of insurance they buy the get $1 if x=20 realizes. A unit of insurance costs $0.75. How many units of insurance does the decision maker buy? 80/3 ○ 40 40/3 20 None of the answers is correct.

The decision maker has utility function U(x) = 2 In(x). With 50% probability x=20 and with 50% x=100. The decision maker can buy insurance. For each unit of insurance they buy the get $1 if x=20 realizes. A unit of insurance costs $0.75. How many units of insurance does the decision maker buy? 80/3 ○ 40 40/3 20 None of the answers is correct.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.5P

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