Discussion Questions

Note we’re not expecting perfect answers here, you should spend no more than 3-5 minutes on each question.

1. What are the three problems with Expected Value Theory that Expected Utility Theory can fix?
2. Draw a sketch of a concave utility curve.
3. How would the utility of 1 million dollars be different for the average person in the US and the richest person in the world (as of writing Jeff Bezos with nearly 200 billion dollars)? Who would give the 1 million dollars more utility?
4. By adding points to your concave utility curve, illustrate how the utility of 1 million dollars would be different for someone who is very wealthy compared to someone who is less wealthy.