-Bobby is offered a job as a salesperson in which there is a 50 percent chance that he will make $2,000 and a 50 percent chance that he will make $10,000. Bobby's utility of wealth curve is shown in the figure above. What is Bobby's expected income from taking this job?
A) $4,000
B) $6,000
C) $2,000
D) $10,000

Question

-Bobby is offered a job as a salesperson in which there is a 50 percent chance that he will make $2,000 and a 50 percent chance that he will make $10,000. Bobby's utility of wealth curve is shown in the figure above. What is Bobby's expected income from taking this job?
A) $4,000 
B) $6,000 
C) $2,000 
D) $10,000

Quizplus · Accepted Answer

Bobby's expected income is calculated by taking the average of the possible outcomes, weighted by their probabilities: (0.5 * $2,000) + (0.5 * $10,000) = $6,000.

-Bobby Is Offered a Job as a Salesperson in Which