-Marylou, whose utility of wealth curve is shown in the figure above, faces two options. Option A yields $200 for sure. Option B has a 0.3 probability of yielding $100, and a 0.7 probability of yielding $300. Marylou, who is
A) picks option A.
B) picks option B.
C) is indifferent between option A and option B.
D) needs more information to make a choice.

Question

-Marylou, whose utility of wealth curve is shown in the figure above, faces two options. Option A yields $200 for sure. Option B has a 0.3 probability of yielding $100, and a 0.7 probability of yielding $300. Marylou, who is
A) picks option A. 
B) picks option B. 
C) is indifferent between option A and option B. 
D) needs more information to make a choice.

Quizplus · Accepted Answer

Marylou's expected utility from Option B is higher than the utility from the certain $200 in Option A, as her utility of wealth curve suggests she is risk-neutral or risk-seeking.

-Marylou, Whose Utility of Wealth Curve Is Shown in the Figure