Farmer Tom is trying to decide what to produce on his farm in the upcoming season. In the past, he has usually grown Crop A. If he grows Crop A, there is a 70% chance that his crop will yield $15,000 in profit and a 30% chance that he will earn zero profit.a. What is the expected value of his profit if he grows only Crop A?b. Now Farmer Tom considers dividing his land between two crops: Crop A and Crop B. There is a 5% chance that both crops will fail, and Tom will earn zero profit. There is a 25% chance that only one crop will grow, and Tom will earn $6,000 in profit. There is a 60% chance that both crops will grow, and Tom will earn $15,000 in profit. What is the expected value of his profit if he grows both crops?c. Which option would a risk-averse farmer choose?d. Which option would a risk-seeking farmer choose?e. Which option would a risk-neutral farmer choose?
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