1. Option 1: $10 million
Option 2: 20% chance of $20 million,
20% chance of $12 million,
60% chance of $5 million
a. What is the EV(expected value) of option 2?
b. If you are risk-averse, which option should you choose? Explain.
2. Describe two factors discussed in class that lead to competitive imbalance within a sports league.
3. Under what circumstances would an economist expect revenue sharing to NOT improve competitive balance? Explain your answer.