Question: An individual has the utility function U = , where W denotes wealth, and is considering a bet in which there is a 30 per cent chance of winning £49 clear, and a 70 per cent chance of winning nothing.
(a) Will the individual take the bet if it costs £5?
(b) Will they take it if it costs £2?
(c) Will they take it at a cost of £5 if the utility function takes the form U = W?
(d) Will they take it at a cost of £20 if the utility function takes the form U = W?
(e) Will they take it at a cost of £20 if the utility function takes the form U = W2?