For the last two questions, consider an adventurous group of manual laborers. Th

Question

For the last two questions, consider an adventurous group of manual laborers. They take out a map and point - with eyes closed - to a random location. Then they go there and work.

There are four possible outcome values (V) for this decision (we'll describe them as A = Awesome, B = Pretty Good, C = Okay, and D = Horrible). Associated with each outcome is a monetary payment. And once the whole thing is over, the worker will experience satisfaction (utility) as described by the following utility function:

Calculate the expected value of the money payout.

Calculate the expected utility.

Explanation / Answer

Expected value of money payout= 10%*2000 + 30%*1500 + 40%*1000 + 20%*0 = $1,050

Utility = 5 / 2 * 1050 = 2.625

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