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Using the Following:
the Manager's Utility Function for Profit Is π\pi

Question 47

Multiple Choice

Using the following:
The manager's utility function for profit is U π\pi = 10 ln π\pi , where π\pi is the dollar amount of profit. The manager is considering a risky decision with the four possible profit outcomes shown below. The manager makes the following subjective assessments about the probability of each profit outcome:
 Prabability  Profit outcome ($)  0.05$5,0000.10$10,0000.35$15,0000.50$20,000\begin{array} { c c } \text { Prabability } & \text { Profit outcome (\$) } \\\hline 0.05 & \$ 5,000 \\0.10 & \$ 10,000 \\0.35 & \$ 15,000 \\0.50 & \$ 20,000\end{array}
-What is the expected profit?


A) $12,000
B) $13,000
C) $14,000
D) $15,000
E) none of the above

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