. Problems and Applications Q9

Alex has a utility function U=W12U=W12, where WWis his wealth in millions of dollars and UUis the utility he obtains from that wealth. In the final stage of a game show, the host offers Alex a choice between (A) $4 million for sure, or (B) a gamble that pays $1 million with probability 0.4 and $9 million with probability 0.6.

Use the blue curve (circle points) to graph Alex's utility function at wealth levels of $0, $1 million, $4 million, $9 million, and $16 million.