Answer to Question #289842 in Microeconomics for Alemu

Question

Consider a lottery with two equally likely outcomes, $ 25 and $ 144, with associated utility 

function of individuals A, 

( ) √ and individual B, 

( ) 

a) Determine expected utility and utility of expected value of the lottery for each 

individual? 

b) Define and compare certainty equivalent of individual A and B?

c) Compare risk premium of individuals A and B?

Answer 1

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