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Please provide a step-by-step solution to the problem so that I can teach myself how to solve the problem. #1 MICRO - THESE PROBLEMS 1.

Please provide a step-by-step solution to the problem so that I can teach myself how to solve the problem.

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#1 MICRO - THESE PROBLEMS 1. Randy Variable is an expected utility maximizer with a von Neumann Mor- genstern utility function v (x ) = \\. He has a wealth of $99, 000. His shady brother-in-law has given him inside information on the outcome of an upcoming sports event. On the basis of this information, Randy believes that the probability that Team A will defeat Team B is 2/3, despite the fact that Team B is two-to-one favorite to win among the betting community. It is possible for Randy to bet as much money as he wishes on Team A to win at the prevailing odds. That is, for every dollar that he bets, he will get back $2 if Team A wins and will get back nothing if Team A does not win. A. Let CA be the contingent commodity wealth if Team A wins and let Up be wealth if Team B wins. Write a budget equation expressing the combinations of CA and CB that Randy can afford by betting some amount of money on Team A. Draw a graph to show all of these combinations. B. If Randy bets so as to maximize his expected utility, what will be his wealth if Team A wins? What will be his wealth if Team B wins? C. Peter Punter has a von Neumann Morgenstern utility function v(x) = -1"and he also has a wealth of $99, 000. He has the same shady brother-in-law as Randy and the same inside information on the outcome of an upcoming sports event. Peter also believes that the probability that Team A will defeat Team B is 2/3, despite the fact that Team B is two-to-one favorite to win among the betting community. It is likewise possible for Peter to make bets such that for every dollar that he bets, he will get back $2 if Team A wins and will get back nothing if Team A does not win. If Peter places his bets to maximize his expected utility, what will be his wealth if Team A loses? What will be his wealth if Team A wins

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