Sally purchases a dozen eggs. Although the cost of transporting the eggs is zero, Sally knows that there is still a 50 percent probability that she will break all of the eggs before she gets home. Knowing this, Sally considers two transportation strategies. The first strategy involves carrying all the eggs home in one trip. The second strategy involves carrying six eggs in each of two trips.

a. How many eggs are expected to survive using each strategy?

b. Suppose that Sally is risk averse. Illustrate Sally’s strategy options.

c. If the cost of transporting eggs is zero, which strategy should Sally choose? Is it possible for Sally in increase her utility by increasing the number of trips? How might your answer be different if transporting eggs is costly?