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Amanda has a von Neumann-Morgenstern utility function given by U= VM , where Mis her income. If she becomes an economics professor, she will make M- 64/yr with probability 1. If she becomes an attorney, she will make M= 900/yr if she becomes a partner in a Wall Street firm, but only M 49/yr if she fails to make partner. The probability of her becoming a partner is 0.3. Ellis is an infallible Judge of legal talent. After a brief interview, he can state with certainty whether Amanda will become a partner. What is the most Amanda would be willing to pay for this information? (Set up the relevant equation and solve it.) Instructions: Round your answer to 2 decimal places.

Amanda has a von Neumann-Morgenstern utility function given by U= VM , where Mis her income. If she becomes an economics professor, she will make M- 64/yr with probability 1. If she becomes an attorney, she will make M= 900/yr if she becomes a partner in a Wall Street firm, but only M 49/yr if she fails to make partner. The probability of her becoming a partner is 0.3. Ellis is an infallible Judge of legal talent. After a brief interview, he can state with certainty whether Amanda will become a partner. What is the most Amanda would be willing to pay for this information? (Set up the relevant equation and solve it.) Instructions: Round your answer to 2 decimal places.

Calculus For The Life Sciences
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter9: Multivariable Calculus
Section9.4: Total Differentials And Approximations
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Amanda has a von Neumann-Morgenstern utility function given by U= VM , where Mis her income. If she becomes an economics professor, she will make M- 64/yr with probability 1. If she becomes an attorney, she will make M= 900/yr if she becomes a partner in a Wall Street firm, but only M 49/yr if she fails to make partner. The probability of her becoming a partner is 0.3. Ellis is an infallible Judge of legal talent. After a brief interview, he can state with certainty whether Amanda will become a partner. What is the most Amanda would be willing to pay for this information? (Set up the relevant equation and solve it.) Instructions: Round your answer to 2 decimal places.
Transcribed Image Text:Amanda has a von Neumann-Morgenstern utility function given by U= VM , where Mis her income. If she becomes an economics professor, she will make M- 64/yr with probability 1. If she becomes an attorney, she will make M= 900/yr if she becomes a partner in a Wall Street firm, but only M 49/yr if she fails to make partner. The probability of her becoming a partner is 0.3. Ellis is an infallible Judge of legal talent. After a brief interview, he can state with certainty whether Amanda will become a partner. What is the most Amanda would be willing to pay for this information? (Set up the relevant equation and solve it.) Instructions: Round your answer to 2 decimal places.
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