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Quiz1S10 - lose it and be left with nothing The jeweler...

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Econ 100b Spring 2010 Quiz 1 Bonnie’s Sections You have 10 minutes to take this quiz. For each of the questions please circle the letter corresponding to the correct answer. 1. You have $16 and preferences given by u ( w ) = w . Which of the following options is most attractive? (a) Do nothing (b) Get a free lottery ticket that has a 1 in 3 chance of winning $84 (c) Pay $12 for a lottery ticket that has a 50-50 chance of winning $21 (d) Pay all your money ($16) for a lottery ticket that has a 1 in 2 chance of winning $100 2. You just bought a $80 ring. Because you are forgetful, there is a 10% chance you will
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Unformatted text preview: lose it and be left with nothing. The jeweler offers insurance against the possibility of loss at the price of 25 cents ($0.25) for each dollar of protection. You can buy any amount of this insurance, positive or negative. Let c l and c nl represent your wealth in the cases that it lose and do not lose it, respectively. Which equation best characterizes the set of possible combinations of c l and c nl ? (a) c nl = 100-c l 4 (b) c nl = 80-c l 3 (c) c nl = 60-c l 5 (d) c nl = 75-c l 3 2...
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