-Lucy works as a college instructor for a fixed annual salary of $30,000. She is considering quitting this job and becoming a real estate broker. Lucy believes that as a realtor she has a 40 percent chance to make $60,000 per year and a 60 percent chance to make $25,000 a year. The figure above shows Lucy's total utility of wealth curve (U). Lucy's expected annual income from real estate brokerage is
A) $39,000.
B) $42,500.
C) $33,000.
D) $47,500.

Question

-Lucy works as a college instructor for a fixed annual salary of $30,000. She is considering quitting this job and becoming a real estate broker. Lucy believes that as a realtor she has a 40 percent chance to make $60,000 per year and a 60 percent chance to make $25,000 a year. The figure above shows Lucy's total utility of wealth curve (U). Lucy's expected annual income from real estate brokerage is
A) $39,000. 
B) $42,500. 
C) $33,000. 
D) $47,500.

Quizplus · Accepted Answer

Expected annual income = (0.4 * $60,000) + (0.6 * $25,000) = $39,000

-Lucy Works as a College Instructor for a Fixed Annual