Tickets to a lottery cost $1. There are two possible prizes: a $10 payoff with probability 1/50, and a $1,000,000 payoff with probability 1/2,000,000. What is the expected monetary value of a lottery ticket? When (if ever) is it rational to buy a ticket? Be precise-show an equation involving utilities. You may assume current wealth of $k and that U(Sk) = 0.

You may also assume that U(Sk+lo) = 10 x U(Sk+l)), but you may not make any assumptions about U(Sk+l,ooo,ooo)S. ociological studies show that people with lower income buy a disproportionate number of lottery tickets. Do you think this is because they are worse decision makers or because they have a different utility function?