Expected Utility: Theory & Formula


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question 1 of 3

Under conditions of uncertainty, expected utility theory says that the best choice between alternatives is the one that:

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1. Sal the baseball slugger thinks there is a 75% chance he will hit 20 home runs this year, and a 25% chance he will hit 40. What is the expected value for Sal's number of home runs?

2. Martha will receive 25 units of utility from baking a cake, 30 units from baking a pie and 35 units from making brownies. Which should she cook?

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About This Quiz & Worksheet

Answer questions on the expected utility model. Quiz topics include conditions of uncertainty and an expected value for home run predictions.

Quiz & Worksheet Goals

You'll be asked questions regarding the following situations:

  • The choice between baking three different things with alternate units of utility
  • A principle that best describes two bowls of ice cream with different values of utility
  • An expected utility regarding a trip to the beach and different kinds of weather

Skills Practiced

  • Reading comprehension - ensure that you draw the most important information from the related lesson on the expected utility model
  • Information recall - access the knowledge you've gained regarding predictions for home runs
  • Knowledge application - use your knowledge to answer questions about unity of utility in different scenarios

Additional Learning

More information is available from the lesson entitled Expected Utility: Theory & Formula. These topics will be considered:

  • An analytical approach to making any decision
  • Definition of expected value
  • Explanation of the expected utility theory
  • The expected utility formula