Question: 2. Consider an individual with the following utility function u(x) = min {2x, x + 101 01 where r 2 0 denotes income. (a) Depict

2. Consider an individual with the following utility function u(x) = min {2x, x + 101 01 where r 2 0 denotes income. (a) Depict the utility function with u(x) on the vertical axis, and income r on the horizontal axis. Is this individual risk loving, risk neutral, or risk averse? Explain. (b) Suppose that there are three states of the world, (81, 52, 83), each equally likely. There are two assets, I, and 12. The income of the two assets at different states are given below: II ($1 ) = 1, I1 ($2 ) = 5 , I1 (83) = 9: I2(81) = 2, I2 ( $2) = 3, I2 ( 83) = 10. Calculate the expected utility of r, and 12. Which asset would be preferred by this individual

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