Suppose a person's preferences over lotteries satisfies expected utility, with a utility index u(x) =x. Their initial wealth is $100. If they park illegally, they are caught with probability 1/2, and must pay $10 if caught. Parking legally costs $7.60 for sure. (You will need a calculator for these questions.)

Problem 2.1

Will this person park illegally or legally?

Problem 2.2

What if the fine for getting caught is increased by a factor of 1.5 to $15? Will this change their parking choice?

Problem 2.3

What if the fine is kept at $10, but the probability of getting caught is increased by a factor of 1.5 to 75%? Will this change their parking choice?