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Suppose a decision maker has a utility function and is faced with a lottery where there is a 30% chance of earning $30 and a 70% chance of earning $80. What is the expected utility of this lottery?

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To evaluate the expected utility, we need to apply the given utility function to each possible outcome and then weight by the respective probabilities. First, identify the utility function: U(I) = sqrt(I). This means the utility of an income I......Login to view full explanation

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