Please illustrate when the prospect theory resembles to expected utility theory based on the following formula: Expected Utility Theory E(U) =begin inline style sum from i equals 1 to N of end style P subscript i U left parenthesis w subscript i right parenthesis Prospect Theory E(v) = begin inline style sum for blank of end style pi left parenthesis p r subscript iota right parenthesis v left parenthesis x subscript iota minus r right parenthesis pi left parenthesis p r right parenthesis space equals space p r to the power of gamma space divided by space left square bracket p r to the power of gamma space plus space left parenthesis 1 minus space p r right parenthesis to the power of gamma right square bracket to the power of left parenthesis 1 divided by gamma right parenthesis end exponent

2.Question 2What problems does prospect theory solve? (check all that apply)1 pointPeople can underestimate high probabilities and overestimate low probabilitiesPeople do not treat gambles as equivalent to their expected utilityPeople will make big gambles to avoid lossesPeople will often make purchases impulsively

Prospect pair 1 -- choose between: W: (0.2, $4000) X: (0.25, $3000) Prospect pair 2 -- choose between: Y: (0.8, $4,000) Z: ($3000) Part (a): What is the expected utility for Prospect pair 1 (X)? (Note: Please enter your answer rounded to the nearest whole dollar. For example, if your answer is $1,234.89, please input 1235 in your answer box.) (1 mark) Part (b): Based on the expected utility theory, which Options (W or X) would you choose for Prospect pair 1? (Note: If your answer is Option W, you only need to input W in your answer box.) (1 mark) Part (c): Ignoring the expected utility theory, would most people choose Options Y or Z from Prospect pair 2? (Note: You only need to input Y or Z in your answer box.) (1 mark) Part (d): Please explain your rationale for your answer in Part (c) in less than 50 words. (2 marks)

Question 7What is the shape of the value function in prospect theory?1 pointGains: concave up; Losses: concave upGains: concave up, Losses: concave downGains: concave down; Losses: concave upGains: concave down; Losses: concave down

In the story of the Man in the Green Bathrobe, there is oneparticular feature of Prospect Theory that this gambler apparentlyviolates. Which feature?1 point Risk aversion over gains Loss aversionRisk seeking over losses

Question 9This week, you were introduced to the Disposition Effect, which highlights the way in which many people’s preferences “flip” from Decision A to Decision D—even though A & C are identical, as are B & D. [Note: There is more than one correct answer]Which of the following aspects of Prospect Theory help(s) to explain this violation of the Invariance Axiom (select all that apply).