. The figure below shows the total utility that Rai, a first-year degree student, would receive from different levels of annual income. Assume at the moment that his annual income (from an allowance from his parents and some part-time work in a burger bar) is 4000. Spending this rationally gives him a total utility of 500 'utils'.Assume that he is offered the chance to gamble the whole 4000 on the single toss of a coin. If he wins then he doubles his money and has an income of 8000. If he loses then then he has to pay 4000 and so has no income left.

(a)If he takes the gamble, what will be his utility this year if he wins?

(b)If he takes the gamble, what will be his utility this year if he loses?

(c)What would be his expected utility from the gamble?......................................................................

(d)Why is it likely that he will not take the gamble, and thus be risk averse?...............................