Suppose a consumer's expected utility function given two possible states of nature A and B can be expressed in terms of dollars worth of food consumption,F,in both states as U(F_A,F_B)= [0.6 × ln(F_A)] + [0.4 × ln(F_B)].For this utility function,MU_A is (0.6/F_A)and MU_B is (0.4/F_B).Without insurance,the consumer can consume 200 in state A but only 50 in state B. The consumer can purchase insurance at a premium of 50 cents per dollar of benefit. How much insurance will she purchase? A) $50 B) $150 C) $250 D) $416.67

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The Answer of Suppose a consumer's expected utility function given two possible states of nature A and B can be expressed in terms of dollars worth of food consumption,F,in both states as U(F_A,F_B)= [0.6 × ln(F_A)] + [0.4 × ln(F_B)].For this utility function,MU_A is (0.6/F_A)and MU_B is (0.4/F_B).Without insurance,the consumer can consume 200 in state A but only 50 in state B. The consumer can purchase insurance at a premium of 50 cents per dollar of benefit. How much insurance will she purchase? A) $50 B) $150 C) $250 D) $416.67

Suppose a Consumer's Expected Utility Function Given Two Possible States