What is her expected consumption

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Danielle has the following VonNeumann-Morgenstern utility function with v(c)=c. (i.e. If there are only two possible states of the world with probabilities L and H and consumption levels cL and cH; expected utility will be LcL + HcH) She is a soccer player. If she does not get injured she will get 40000 dollars per month to play. There is a 20% chance she may be injured and only make 1600 dollars per month instead.

(a) What is her expected consumption?

(b) Someone o§ers her a coaching job where she will get 10000 dollars a month without any risk of injury. Will she accept this job?

Reference no: EM131246739

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