6. Jacob has expected utility for gambles, with a utility function for money given by u(x) = x. Daniel offers him the following bet: He will flip a fair coin. If it comes up heads, Jacob gets $2. If not, then he flips again. If that comes up heads, Jacob gets $4. If not, then the bet ends and Jacob gets $0. What is the maximum Jacob would be willing to pay to accept this bet?

A. $2. B. $4. C. $0. D. Everything he owns ($).

7. Suppose Nathan has expected utility preferences with u(x) = x. He has $49 in wealth but with 1/2 probability his wealth decreases to $25. What is the maximum premium p that Nathan would pay to fully insure against this loss (meaning his wealth will be $49-p for sure)?

A. $36. B. $13. C. $11. D. $2.