Question 1 Gamble A is as follows: ($100, 0.6; -$100, 0.4) This is a gamble with a 60% chance of winning $100 and a 40% chance of losing $100. (a) Would a risk neutral decision-maker (who maximises expected value) be willing to pay $10 to play gamble A? What is the most they would be willing to pay to play? (1 mark) (b) Would an expected utility maximiser with wealth $200 and utility function U(:c) = ln(a3) be willing to pay $10 to play gamble A? What is the most they would be willing to pay to play? (1 mark) (c) Would the expected utility maximiser with utility function U(;L') = ln(a:) change their decision if they had $1000 in wealth? Explain. (1 mark) (d) At what wealth is the expected utility maximiser with utility function U(:c) = ln(:1:) indifferent between accepting gamble A or not? (2 marks) Question 2 [Word limit: 300 words] In your own words but using concepts from this subject explain why a risk averse agent who makes decisions according to expected utility theory might purchase insurance but not a lottery ticket