S
spf2004
Guest
Maryterese has found what she thinks may be a famous Greek statue. It costs $5,000. She thinks there's a 60 percent chance it's real, and if she buys it, she can resale it at $75,00, which would profit her $2,500. If she buys the statue and it turns out to be a fake, it will be worthless and she'll lose $5, 000. Her current income is $10,000. Her utility function is U(Y) = (100 + 0.01Y)1/2 = ?(100 + 0.01Y).
(a) Calculate Maryterese's expected utility of purchasing the statue.
(b) Maryterese knows an art appraiser down the street. If the statue turns out to be real, she can sell it for a sure $2,500 profit. Calculate Maryterese's expected utility of going to the appraiser.
(c) What's the most she'd be willing to pay the appraiser for information on the authenticity of the statue?
(a) Calculate Maryterese's expected utility of purchasing the statue.
(b) Maryterese knows an art appraiser down the street. If the statue turns out to be real, she can sell it for a sure $2,500 profit. Calculate Maryterese's expected utility of going to the appraiser.
(c) What's the most she'd be willing to pay the appraiser for information on the authenticity of the statue?