1. Consider a utility function of () = 3. What is the utility for each of the following outcomes?

a) 3

b) (! " , 3; # " , 6)

c) 2

d) (# " , 2; ! " , .# " , 4; ! " , 60)

2. Consider a utility function of () = ". What is the utility for each of the following outcomes?

a) 3

b) (! " , 3; # " , 6)

c) 2

d) (# " , 2; ! " , .# " , 4; ! " , 60)

3. What is the expected monetary value (EMV) of the lottery (# " , $3; ! " , $6)? 4. For each of the following utility function, compare the utility of the lottery () with the utility of amount of money equal to EMV of the lottery, i.e., (()). Write the comparison symbol >, <, =, or ? for cannot tell. For example, () > (()) or () ?(()), etc. a) U is an arbitrary function

b) U is monotonically increasing, and its rate of increase is increasing, i.e., its 2nd derivative is positive).

c) U is monotonically increasing linearly, i.e., it 2nd derivative is zero.

d) U is monotonically increasing, and its rate of increase is decreasing, i.e., its 2nd derivative is negative.