1. Suppose a fair, two-sided coin is flipped. If it comes up heads you receive $5. If it comes up tails you lose $1. The expected value of this lottery is (a) $2 (b) $3 (c) $4 (d) $5 (e) None of the above 2. An individual has a vNM utility function over money of u() = VI , where x is final wealth. She currently has $8 and can choose among the following three lotteries. Which lottery will she choose? . Lottery 1: Give up her $8 and face the gamble (0.1, 0.5, 0.4) over final wealth levels ($1, $8, $27). . Lottery 2: Keep her $8. . Lottery 3: Give up her $8 and face the gamble (0.2, 0.8,0.0) over final wealth levels ($1, $8, $27) (a) Lottery 1 (b) Lottery 2 (c) Lottery 3 (d) She is indifferent between the three lotteries