1. Given two consequences (C₁ & C₂) for a given act (A), give the formula for the expected value of the given act, Exp(A)? (1 pt.)

2. Explain what the expected value of A, "Exp (A)," means. (2 pts.)

3. Think of a decision you made recently where you had to choose between one of two actions - call one, action"A," and the other, action"B." List the two actions. For each action, list two mutually exclusive consequences that you anticipate could occur as a result of choosing that action. For each action, give the probabilities and utilities that you would assign to each consequence. Utilities can be given in terms of money, time, or abstract"utility points." Then, use the expected value formula to calculate the expected value of each action and determine whether one action had a better expected value than the other. (5 pts.)

A:

C₁: C₂:

Pr(C₁): U(C₁): Pr(C₂): U(C₂):

Exp(A):

B:

C₁: C₂:

Pr(C₁): U(C₁): Pr(C₂): U(C₂):

Exp(B):

When you made your choice, did you choose the action with the highest expected value? Why/Why not?

4. You paid $10 for a raffle ticket, and you calculate that the expected value for buying the ticket is $7 (i.e., -$7). What is the fair price for the ticket? Explain what it means to pay the fair price for a ticket in light of the expected value of it. (2 pts.)