Gary has to decide whether to work at the business or at home. If he works at home, Gary receives a payoff of $98. However, if Gary works at the business, he makes $100.

Working at the business incurs a risk with a probability 0.10, the cost of which is $25. If this risk comes to be, there is 0.01 probability of an additional fine of

$50.

Gary has a risk-averse utility function of

(a) Show that Gary will choose to work from home (b) How much of a subsidy would be required to make Gary indifferent between staying home and working at the business