1. What is the expected value of playing this game?
   1. The player repeatedly rolls a six-sided die until it comes up 6.
   2. When the die comes up 6, the player receives a payoff, and the game ends. The player gets precisely one payoff.
   3. The initial payoff is $6, and it increases by 20%.

The first roll payoff is $6; the second roll payoff is $7.20 (1.2*$6); the third roll payoff is $8.64 (1.2*$7.20), and so on. What is the expected value of playing this game?

1. A person has preferences of the form U(pounds of restaurant food, pounds of home food)

= 0.6 * ln(pounds of restaurant food) + 0.4 * ln(pounds of home food)

Which basket would they prefer? Note that "lbs." is the abbreviation for pounds.

Restaurant food Home food

Basket A 1000 lbs. 750 lbs.

Basket B 750 lbs. 1000 lbs.

1. This question is a continuation of the previous one.

The person has $25,000 to spend on food in total.

How much do they spend on food at home and how much on food at the restaurant?

1. This question is a continuation of the previous one.

Food in a restaurant costs $20 per pound, and food at home costs $10 per pound.

How many pounds does the person consume at home, and how much do they eat at the

restaurant?

1. This question is a continuation of the previous one.

Why does this choice contradict your answer to question 2, where they prefer the other basket?

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1. This question is a continuation of the previous one.

If the person buys one less pound of restaurant food, how many more pounds of home food could they buy?

1. This question is a continuation of the previous one.

Instead of having $25,000 to spend on food, the person owns 2,500 pounds of food to make at home. What is the value of this food at the current prices, and is the optimal consumption any different?