-Andrew's utility of wealth schedule is depicted in the above table. Andrew is offered a job as a cook which pays $10,000. He is also offered a job as a server which will pay $5,000 if tips are poor and $15,000 if tips are good. There is a 50 percent chance that tips will be poor and a 50 percent chance that tips will be good. Given the nature of Andrew's job offers and his utility of wealth schedule, Andrew will
A) accept the offer to work as a server.
B) accept the offer to work as a cook.
C) be indifferent between working as a cook or a server.
D) be unable to reach a decision about which offer to accept.

Question

-Andrew's utility of wealth schedule is depicted in the above table. Andrew is offered a job as a cook which pays $10,000. He is also offered a job as a server which will pay $5,000 if tips are poor and $15,000 if tips are good. There is a 50 percent chance that tips will be poor and a 50 percent chance that tips will be good. Given the nature of Andrew's job offers and his utility of wealth schedule, Andrew will
A) accept the offer to work as a server. 
B) accept the offer to work as a cook. 
C) be indifferent between working as a cook or a server. 
D) be unable to reach a decision about which offer to accept.

Quizplus · Accepted Answer

Andrew will calculate the expected utility for each job. The expected utility of the server job is the average of the utilities for $5,000 and $15,000, weighted by their probabilities. If the utility of $10,000 is higher than this expected utility, Andrew will choose the cook job.

-Andrew's Utility of Wealth Schedule Is Depicted in the Above