please show all work and use right formulas. Mayor-elect Franklins utility of $100,000 was

0.15* 700000 - 0.85 * 100000

= 20,000

3. (6 pts) Mayor-elect Franklin is also indifferent between keeping the $100,000 surplus and giving bonuses to city employees. Franklin believes that bonuses paid to public sector employees result in a 20% increase to their productivity (which would save the city an additional $250,000 after the bonuses are paid) when they are effective. Studies on bonuses given to employees of similar sized cities show that the hoped-for productivity gains occur 60% of the time. In other words, the bonuses paid are only effective 60% of the time. NOTE: You need to know the answer to Question 2 to answer Question 3 a. What is Mayor-elect Franklin's utility of $250,000? b. Graph Mayor-elect Franklin's utility curve. (Use excel, or a ruler, do it accurately. Points will be deducted for negligence) C. Is Mayor-elect risk averse or risk taker? What attitude do you think is desired in public policy?|