1.Ayesha runs a restaurant. She has to choose whether to offer a discount on appetizers or not. Between 2009 and 2019 she experimented with this discount twenty times. On 17 of those experiments her profits went up by $50 per night. On three of those occasions her profits were $100 below average. Should she offer a discount on appetizers now?

Note: she is in a country where pandemic disease has been affecting customer behavior in 2020 and 2021.

--> On this question, select ALL answers that are true <--

There may be one right answer, or two, or three, or four, or five

Select one or more:

A.She should offer the discount in 2021 because she knows that option has higher expected utility.

B.She cannot know whether it is rational to offer the discount in 2021 because (due to covid) she does not know the 2021 probability that the discount will increase profits.

C.In 2009-2019 the probability that the discount would decrease profits was approximately 17.6% (3/17)

D.We have no information about the probability of success that this discount had in 2009-2019.

E.In 2009-2019 the probability that the discount would increase profits was approximately 85% (17/20)

2.Min Joon is a planner for the city. He has the option of reducing property taxes on newly constructed apartment buildings, or using that money to fund subsidized housing. He estimates that, if the economy is strong the tax reduction would cause 1000 extra homes to be built downtown but would have no effect on the suburbs; if the economy is not strong then there will be only 500 new homes created downtown and none in the suburbs. Economists believe that the economy is fairly likely to be strong this year (67% probability). If he chooses to fund subsidized housing he can be sure that there will be 300 new homes downtown and 400 in the suburbs. He also has the option of doing nothing, in which case he can be sure that his actions will not cause new houses to be built anywhere.

Assume that increasing the number of homes in the city is his priority in this situation.

Select one:

A.The expected utility of reducing propertytaxes is 1.

B.The expected utility of reducing property taxes cannot be calculated from the information given.

C.The expected utility of reducing propertytaxes is 875.

D.The expected utility of reducing propertytaxes is 625.

E.The expected utility of reducing propertytaxes is 67%

F.The expected utility of reducing property taxes is 835.

G.The expected utility of reducing propertytaxes is 1500.

H.The expected utility of reducing propertytaxes is 925.

I.The expected utility of reducing property taxes is 1005.

J.The expected utility of reducing propertytaxes is 670.