1.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 instead 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.Min Joon should fund subsidized housing.

B.Two of his options are equally good.

C.Min Joon should cut property taxes.

D.We do not have enough information to determine what a rational person would choose to do.

E.Min Joon should do nothing.

2.Five days a year the company president comes to visit. If Parneet is prepared to talk about her current work there is an 80% chance that she will get extra help with her project, saving her 100 hours of work. If she is not prepared, there is only a 60% chance that she will get the extra help.

(note: there are 365 days in a year)

Parneet has the option of not preparing for a possible visit by the president. What is the expected utility of not preparing? Use hours of work saved as your measure of utility.

Select one:

A.The expected utility is between 0 and 0.25.

B.The expected utility is between 0.25 and 0.5.

C.The expected utility is between 0.5 and 0.75.

D.The expected utility is between 0.75 and 1.

E.The expected utility is between 1 and 1.25.

F.The expected utility is between 1.25 and 1.5.

G.The expected utility is between 1.5 and 1.75.

H.The expected utility is between1.75 and 2.

I.The expected utility is between2 and 3.

J.The expected utility is between 4 and 5.

K.The expected utility is greater than 5.

L.The expected utility is exactly 0.

M.The expected utility is less than zero.

3.Five days a year the company president comes to visit. If Parneet is prepared to talk about her current work there is an 80% chance that she will get extra help with her project, saving her 100 hours of work. If she is not prepared, there is only a 60% chance that she will get the extra help. Tonight, should she spend an hour preparing just in case the president comes to visit? What should she do?

(note: there are 365 days in a year)

Select one:

A.Expected utility cannot be calculated in this scenario.

B.She should not prepare tonight because not preparing is the option with higher expected utility.

C.Preparing and not preparing have equal expected utility.

D.She should prepare tonight because that option has a higher expected utility.

E.We do not need to calculate the expected utility because we know that the probability that the President will visit is low.