1.Suppose Alice's utility function is U = , where U is the utility level from owning wealth W. Alice decides to invest in a business which can yield $6,400 with probability 1/5, and $3600 with probability 4/5. What is Alice's expected utility of this investment? (A) 80 (B) 76 (C) 64 (D) 60 (E) None of the above.

7. According to an article in the Wall Street Journal, neither UPS nor FedEx raised rates during the holiday season of 2014, but both firms did raise them during the 2016 holiday season. Which of the following statements is correct? (A) In 2014, neither firm raised rates during the holiday season because they were at the equilibrium of an infinite repeated game.(B) In 2016, both firms raised rates because they were at the equilibrium of a finite repeated game. (C) In 2016, both firms raised rates because they were competing to attract additional customers. (D) UPS and PedEx set output and price over and over again, continually observing their competitors' behavior and adjusting their own accordingly. This allows them to develop reputations from which trust can arise. As a result, oligopolistic coordination and coopcration can sometimes prevail.

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