Charline must decide whether to open a business or work as an economics tutor. The business she is considering is open a store called “Charline Sells Seashells by the Seashore”. This business is risky because 60% of the time Charline would have a GOOD seashell harvest and earn an income of $300. But 40% of the time Charline would have a BAD seashell harvest and earn an income of $0. If she instead chooses to work as an economics tutor, Charline would earn a certain income of $160. Charline has initial wealth of $100 and her utility function is:U(C)= Square Root (C) where C is consumption:
What is Charline’s expected income if she opens her business?
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