Joe buys a lottery ticket. He has a 1 percent chance of having total wealth of $1 million, and a 99 percent chance of having total wealth of $25,000. What is Joe's expected wealth?

Joe believes that he will win the lottery.
$24,750
$25,000
$34,750

Joe buys a lottery ticket. He has a 1 percent chance of having total wealth of $1 million, and a 99 percent chance of having total wealth of $25,000. If Joe had $1 million, his total utility would be 900 units. If Joe had $25,000, his total utility would be 50 units. What is Joe's expected utility?

58.5
900.0
49.5
50.0

Amelia has total utility of 90 units when she has wealth of $30,000. When Amelia has a 60 percent probability of having $40,000 of wealth and a 40 percent probability of having $25,000 of wealth, her total utility is 90 units. What is Amelia's cost of risk?

$4,000
$40,000
$34,000
$30,000

Freda is risk neutral. Her expected utility _______________.

does not depend on the range of uncertainty
equals her marginal utility of wealth
increases directly with the range of uncertainty
increases as the range of uncertainty decreases

Theodore owns a computer worth $5,000, and this is his total wealth. When there is no risk of losing the computer, his utility is 100 units. There is a 5 percent chance that a person's computer will be stolen. Theodore's utility of a guaranteed wealth of $4,000 is the same as his utility of a 5 percent chance of losing his computer. Theodore's maximum value of insurance is _______, and the minimum cost of insurance is _______.

$1,000; $250
$4,750; $50
$4,000; $1,000
$1,000; $4,750

Merv is searching for a new car. His reservation price is $20,000. At the first car dealership he visits, the price of the car is $18,500. Merv buys the car. His marginal benefit of search is _________________.

less than his marginal cost of search
irrelevant because he found the car at the first dealership
greater than his marginal cost of search
equal to his marginal cost of search

Marvin believes that speed limit signs can be interpreted as meaning "Drive the stated speed plus 10 kilometres per hour." Jeannie believes that speed limit signs mean what they say. (This caused unhappiness when they previously commuted to work together.) An automobile insurance company offers two different kinds of insurance. Plan A costs $1,000 a year with a $200 deductible, and Plan B costs $200 with a $1,100 deductible.

Marvin chooses Plan A and Jeannie chooses Plan B.
Marvin and Jeannie decide to never be in a car together, ever again.
Marvin chooses Plan B and Jeannie chooses Plan A.
Marvin and Jeannie both choose Plan A.

The table shows the returns per $100 investment in investment A or investment B. The returns for the investments are independent. What is the expected return from putting $500 in investment B?

$1,625
$875
$325
$1,875

The table shows the returns per $100 investment in investment A or investment B. The returns for the investments are independent. What is the expected return from putting $200 in investment A and $200 in investment B?

$500
$1,200
$1,000
$400

The table shows the returns per $100 investment in investment A or investment B. The returns for the investments are independent. A risk neutral person has $500 to investment in either investment A or investment B. This person will invest __________________.

$500 in investment B.
$250 in investment A and $250 in investment B.
$400 in investment A and $100 in investment B.
$500 in investment A.

Please enter your name and press the SEND button