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Question-1: Solution For the first part, I would choose 1a over 1b since there is the chance of not winning in option 1b, option in case you left out a and lost in options in b you might end up regretting since there was an assured of winning a million dollar. For the second pair, I would pick 2b over 2a; this is because for 2b chances of winning 5million is 10% which is a small percentage difference compared to 2a chance hence it's better to go for 5 million. A common response pattern is (1a & 2b). This choice contradicts with expected utility theory. Question-2: Show why (1a & 2b) choice is inconsistent with expected utility theory??? Since I choose 1a over 1b this means the expected utility for 1a must be greater than 1b (Angner,2016) We can represent this as u(1million)> u(1 million)*0.89 +u(5 million)*0.10 equation 1 On the second part I choose 2b hence the expected utility for 2b must be greater than 2a. u(5 million)*0.10 >u(1million)*0.11 equation 2 We can say u (1...
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