Solved by a verified expert:A nuclear plant needs to be set up in the outskirts of a big city. The plant needs to be close to the city if the (I^2)R and other logistical losses are to be kept to a minimum, which amount to $1 million per km distance per year. Finally, the plant has a meltdown probability in the next 30 years of 0.02, which, if it happens, can cause loss of life and property in dollar amounts of 3 billion (adjusted for inflation) that linearly decreases with distance from the city and drops to zero at 20 km. If the utility function over money (over 30 years) is exponential with risk tolerance equal to 50 million, determine where the plant should be located if the inflation adjusted profit per year is $20 million.
Expert answer:The plant needs to be close to the city if the
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