question archive Kelly is a farmer with zero wealth
Kelly is a farmer with zero wealth
Subject:EconomicsPrice:3.87 Bought7
Kelly is a farmer with zero wealth. She can either plant rice or cotton. If she plants cotton, Kelly earns an income of $1800 if the weather is GOOD, and $0 if the weather is BAD. If she plants rice, Kelly will earn an income of $1000 under both GOOD and BAD weather. The probability of GOOD weather is 0.7. The probability of BAD weather is 0.3. Kelly's utility function is u(c) = 31c, where cis the value of consumption.
a. What type of risk preferences does Kelly have?
b. Which crop will Kelly choose to plant?
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