Problem 1 You have 20 pounds of cheese. We offer to make a gamble with you: tossing a fair coin, if it comes up heads, weíll give you 130 more pounds of cheese; if it comes up tails, weíll take your 20 pounds of cheese. What is the expected value of the gamble?

Assuming that you maximize your expected utility and that you refuse this gamble, what can you infer about your utility function ó that is, how many utiles (basic units of your utility) is a pound of cheese worth?