A classmate offers to play the following game: He will roll a 10-sided die; if it comes up between 1 and 9, he will pay you $10; if it comes up a 10, he will pay you $110. He then informs you that to play the game, you'll have to pay him a fee up front.

If you are risk-neutral and base all decisions on expected monetary value (EMV), what is the most you will pay to play this game?

EMV= $

b.Your classmate Risa has a utility function that depends on wealth. Specifically,U

=

W

2

. If Risa bases her decisions on expected utility, the most she would pay to play this game is$20

. We can infer from Risa's willingness to pay that she isrisk-averse

.