Asked by Rebekah Gonzalez on Jun 14, 2024
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(Table: Choice with Uncertainty) Use Table: Choice with Uncertainty.Suppose that the probability that the sitcom does not make it to television is 50%,that it makes it to television but is not the most viewed show in its time slot is 30%,and that it makes it to television and is the most viewed show in its time slot is 20%.Given this information,Norman,as a utility maximizer:
A) should keep his teaching job.
B) should quit his teaching job and go to Hollywood.
C) will be indifferent between leaving and staying because his expected income is the same whether he stays a teacher or moves to Hollywood.
D) will be indifferent between leaving and staying because his expected total utility is the same whether he stays a teacher or moves to Hollywood.
Expected Income
Expected income is the income a person or entity anticipates receiving over a certain period, based on current or future economic factors.
Utility Maximizer
An economic actor who seeks to get the maximum satisfaction or utility from resources available, under the constraints faced.
Probability
The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1, where 1 indicates certainty.
- Use probabilistic approaches to assess expected income and the utility amidst uncertain environments.
- Examine how individuals seeking to maximize utility make decisions when faced with various situations of risk and uncertainty.
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Learning Objectives
- Use probabilistic approaches to assess expected income and the utility amidst uncertain environments.
- Examine how individuals seeking to maximize utility make decisions when faced with various situations of risk and uncertainty.
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