Question: You wish to construct your personal utility function U(M) for receiving M thousand dollars. After setting U(0) = 0, you next set U(10) = 1

You wish to construct your personal utility function U(M) for receiving M thousand dollars. After setting U(0) = 0, you next set U(10) = 1 as your utility for receiving $10,000. You next want to find U(1) and then U(5). a. You offer yourself the following two hypothetical alternatives: A1: Obtain $10,000 with probability p. Obtain 0 with probability (1 p). A2: Definitely obtain $1,000. You then ask yourself the question: What value of p makes you indifferent between these two alternatives? Your answer is p = 0.125. Find U(1) by using the equivalent lottery method.

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You wish to construct your personal utility

- 9.37. You wish to construct your personal utility function U(M) for receiving M thousand dollars. After setting U(0) = 0, you next set U(10) = 1 as your utility for receiving $10,000. You next want to find U(1) and then U(5). a. You offer yourself the following two hypothetical alternatives: Aj: Obtain $10,000 with probability p. Obtain 0 with probability (1 - p). A2: Definitely obtain $1,000. You then ask yourself the question: What value of p makes you indifferent between these two alternatives? Your answer is p = 0.125. Find U(1) by using the equivalent lottery method

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