How many turkeys should Al purchase (given that he can only purchase 200 or 100)?
When Al is risk neutral and his utility function is Π:
If he buys 100 turkeys, he will sell all the 100 turkeys to consumers, no matter what kind of economy it is, then :
U1 =Π1 = 25*(75% * 100 + 25%*100) - 10*100 = 1500
If he buys 200 turkeys, he will sell all the 200 turkeys to consumers earning 25 each in good condition with probability of 75%, but he will sell 100 turkeys to his brother with ...
The solution answers the question(s) below.