1. Question 2:
Jo’s utility function for gambles is given by the expected value of the square root of c where c is her consumption. If she doesn’t gamble, she will have $900 for sure. She is offered a gamble that depends on the toss of a fair coin. She will have a consumption of $100 if she loses and $1600 if she wins. Should she take this gamble?
A Yes
B No

2. Question 1
Bill’s preferences over gambles are represented by the expected value of
u(x) where u(x)=x2 where x is his consumption. Bill is a risk averter.
A True
B False