Use the figure below. Bob and Nancy have the same income and total utility. Nancy will be willing to pay a insurance premium than is Bob because she is risk-averse. Total utility Current utility OO Current income Bob's utility Nancy's utility higher; more lower; less higher; less lower; more Income
Q: What is the appropriate response for the ? O Price of paint brushes decreases O Demand for paint…
A: Complementary goods are those goods which are used together as they satisfy the same type of want of…
Q: What the difinition of fiscal policy?
A: A policy is a set of rules, guidelines, or principles that dictate the decisions, actions, and…
Q: GDP in an economy is $8,000 billion. Consumer expenditures are $4,800 billion, government purchases…
A: Gross domestic product refers to the total amount of goods and services produced in an economh…
Q: (13) Which of the following machines has the lowest user cost? Machine A costs $10,000 in real…
A: User cost is a measure of the cost of using a capital good, such as a machine or an equipment, over…
Q: Suppose that Felix and Janet represent the only two consumers of laundry detergent in some…
A: Quantity demand can be defined as the specific quantity of commodity which consumer is willing and…
Q: 2. In 1870, the U.S. had an average income of about $2758 and the U.K. of about $3463. In 1999, the…
A: In 1870 US average Income = 2758 and UK Average Income = 3463 In 1999, Average incomes for US and…
Q: In this week’s journal entry, you are asked to reflect on the concept of economies of scale. There…
A: Economies of scale refer to the cost benefits enjoyed by the company when it becomes more efficient…
Q: The world price is $8 a case, and India is open to free trade. Will India export or import mangos?…
A: A country imports when its domestic demand exceeds its domestic supply. A country exports when its…
Q: what are the determinants of elasticity and inelasticity of supply of oil and gas. please cite all…
A: Elasticity of supply basically refers to the responsiveness of the quantity supplied of a good to…
Q: "Europe 2020 strategy?" The Europe 2020 strategy is the EU's program for growth and jobs until the…
A: The Europe 2020 strategy was launched by the European Commission in 2010 with the goal of promoting…
Q: True or false and use a graph to explain: a) can it be welfare-improving for governments to…
A: Social welfare is an important economic concept in the welfare economics. In welfare economics, we…
Q: When a monopolist faces two types of outwardly indistinguishable consumers, one with a higher…
A: true.
Q: A new antitheft system incorporating MEMS technology is being separately evaluated economically by…
A: Disclaimer- “Since you have asked multiple question, we will solve the first three question for you…
Q: 9. Which of the following will shift the aggregate demand curve to the right, ceteris paribus? A) an…
A: Demand curve is the downward sloping curve. Supply curve is the upward sloping curve. Aggregate…
Q: omplete the following, using ordinary interest. (Use Days in a year table.) ote: Do not round…
A: Simple interest is a way of calculating the interest charge on a loan or deposit. It is calculated…
Q: Compute the interest rate if future value (FV) = $11461, present value (FV) = $3959, and number of…
A: Compound interest is the interest computed on the principal and the interest accumulated over the…
Q: Triangular trade means: a. Trade between three continents - Europe, North America, and Africa
A: Triangular trade refers to the trade pattern that existed between three regions during the period of…
Q: There are three goods in the economy: Good One, Good Two, and Good Three. The price of Good One…
A: Cost of living is the cost of maintaining a certain standard of living. It is often used to measure…
Q: i The total utility schedule of Sharon is given below for the number of shoes she consumes. a.…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: Draw a supply curve for pizza. What happens to the supply curve in each of the following scenarios?…
A: Supply and Supply curve The supply of goods and services is offered by the producers or businesses…
Q: Suppose that Zamboni Enterprises is the only company that sells zambonis (ice resurfacing machines).…
A: "Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Consider the Normal Form Game characterized in the following figure: P1 \ P2 A1 A2 A3 A4 B1 (-1,1)…
A:
Q: A “normal” yield curve is upward sloping because investors expect Select one: A. Lower interest…
A: Introduction Normal Yield Curve A normal Yield Curve is also referred to as a Positive Yield…
Q: 1. How is the world governed in the absence of a world government?
A: A government is a system of power that is put in place to manage and regulate the affairs of a…
Q: Assume a market basket includes three avocados, two loaves of bread, two dozen eggs, and a seasoning…
A: The price level is a measure of the average prices of goods and services in an economy at a given…
Q: Suppose the real GDP of an economy is $520 billion dollars and its unemployment rate is 8%. If the…
A: In an economy the output gap refers to the percentage deviation of real GDP of a country to its…
Q: Suppose that Zamboni Enterprises is the only company that sells zambonis (ice resurfacing machines).…
A: Monopolist: A monopolist is a single seller in the market and hence he faces the downward sloping…
Q: 2. The supply Qs = s(P, Pm) has the functional form of: Qs = -12 + 0.5P - 2Pm initially, the…
A: The term "supply" refers to the overall quantity of a certain commodity that is made available to…
Q: Assume that the government of Newworld has taxes of $1 million, transfer pay- ments of $0.6 million,…
A: Private savings is the portion of disposable income that is not spent on consumption. In other…
Q: 13. The level of aggregate supply, in the long run, is not affected by A) changes in technology. B)…
A: The long run aggregate supply curve (LRAS) is a macroeconomic curve that essentially resembles the…
Q: 1 2 Suppose that a consumer has preferences represented by the following utility function: u(x,y) =…
A: Budget constraints shows the relationship between the quantity of two goods, their prices and the…
Q: Commodity handlers have little or no power to set their sale prices and usually focus on maintaining…
A: A price refers to the volume of payment or compensation given by one person or company to another in…
Q: Suppose that Zamboni Enterprises is the only company that sells zambonis (ice resurfacing machines).…
A: We have to first find in monopoly terms then in perfect competition
Q: Suppose that the price of scones = $3, coffee costs $2.5 per cup, and average annual disposable…
A: The demand for Bagels is as given : Q=-20P+10Ps-20Pc+10I P : Price of Bagels Ps : Price of scones =…
Q: Q9 The function ¹-2x² - 4x +8 has a double root at x = 2. Use (a) the standard Newton-Raphson [Eq.…
A: Hard functions are typically solved iteratively using techniques like Newton's Method or…
Q: Alfred marshall concept of marginal utility
A: Utility is the want satisfying power of the commodity which includes the concept of marginal utility…
Q: Consider the following Cournot game with two firms i = 1, 2. The demand function is P(Q) = 100 − Q,…
A: Oligopoly is a market structure in which there are few large players in the market and each player…
Q: The list provides examples of - 1. Dresses like Princess Kate wears sell out quickly 2. President…
A: The amount of an item or service that customers are willing and able to buy at a specific price…
Q: Use the Solow model to plot and analyze the impact of increasing the savings rate on capital…
A: Disclaimer: - Since you asked multiple questions, we are solving only first one as per guidelines.…
Q: At market equilibrium, there is OA surplus O A balance between supply and demand OA shortage O…
A: Equilibrium occurs where the demand and supply forces are equal. Change in demand or supply brings…
Q: What is the Pigovian Tax? Use a figure to explain. Can it be used to correct for the externality?…
A: A negative externality is a cost or negative impact imposed on a third by the production or…
Q: ) Does instant recall satisfy the majority criterion? (h) Does instant recall satisfy the…
A: The instant recall method is a unique approach to selecting a winner in a political or social…
Q: Best Buy sees its earnings drop in the early part of November and late October (before Black Friday…
A: Market demand for a commodity can change as a result of a change in consumers income, their tastes…
Q: The table below shows the parameters for the economy of Hutu. Give your answers to one decimal…
A: Aggregate demand is a term used in macroeconomics to describe the total demand for goods produced…
Q: Graph A A2 A B2 Graph B B Graph C Which graph illustrates the effects on purchases of Corvettes, if…
A: Total demand: Total demand is a microeconomic concept and is calculated for each individual. The…
Q: Suppose that Carlos and Deborah are the only suppliers of pieces of cake in some hypothetical…
A: An Individual's supply curve depicts the positive relationship between the price and quantity…
Q: The city of Fairyland has a labour force of 5000. 50 people lose their jobs each month and remain…
A: Since you have posted multiple questions, we will provide the solution to only the first question as…
Q: A business whose only inputs are labour and capital expands its employment level in the long run…
A: Returns to scale refers to the proportionate change in the output due to some proportionate change…
Q: What is the value of year 4's output in nominal dollars?
A: Given:- Year 3=base period To know:- Year 4 output=?
Q: What is your insights about higher tax imposition to networks that use social media to broadcast?
A: The introduction of elevated taxes on social media networks can have a considerable effect on…
A higher risk averse individual always ready to pay more money as risk premium to convert a gamble into a sure outcome compared to a lesser risk averse individual
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- You and a coworker are assigned a team project on which your likelihood or a promotion will be decidedon. It is now the night before the project is due and neither has yet to start it. You both want toreceive a promotion next year, but you both also want to go to your company’s holiday party that night.Each of you wants to maximize his or her own happiness (likelihood of a promotion and mingling withyour colleagues “on the company’s dime”). If you both work, you deliver an outstanding presentation.If you both go to the party, your presentation is mediocre. If one parties and the other works, yourpresentation is above average. Partying increases happiness by 25 units. Working on the project addszero units to happiness. Happiness is also affected by your chance of a promotion, which is depends on howgood your project is. An outstanding presentation gives 40 units of happiness to each of you; an aboveaverage presentation gives 30 units of happiness; a mediocre presentation gives 10 units…a Suppose you are given a choice between thefollowing options:A1: Win $30 for sureA2: 80% chance of winning $45 and 20% chance ofA2: winning nothing B1: 25% chance of winning $30B2: 20% chance of winning $45Most people prefer A1 to A2 and B2 to B1. Explainwhy this behavior violates the assumption that decisionmakers maximize expected utility.b Now suppose you play the following game: You havea 75% chance of winning nothing and a 25% chance ofplaying the second stage of the game. If you reach thesecond stage, you have a choice of two options (C1 andC2), but your choice must be made now, before youreach the second stage.C1: Win $30 for sureC2: 80% chance of winning $45 13.5 Bayes’ Rule and Decision Trees 767Most people choose C1 over C2 and B2 to B1 (from part(a)). Explain why this again violates the assumption ofexpected utility maximization. Tversky and Kahneman(1981) speculate that most people are attracted to thesure $30 in the second stage, even though the secondstage may never be…1. A woman with current wealth X has the opportunity to bet an amount on the o ccurrence of an event that she knows will occur with probability P. If she wager s W, she will received 2W, if the event occur and if it does not. Assume that t he Bernoulli utility function takes the form u(x) = -e-TX with r> 0. How much should she wager? Does her utility function exhibit CARA, DARA, IARA?
- Utility Theory You live in an area that has a possibility of incurring a massive earthquake, so you are considering buyingearthquake insurance on your home at an annual cost of $180. The probability of an earthquake damagingyour home during one year is 0.001. If this happens, you estimate that the cost of the damage (fully coveredby earthquake insurance) will be $160,000. Your total assets (including your home) are worth $250,000. A. Apply Bayes’ decision rule to determine which alternative (take the insurance or not) maximizes yourexpected assets after one year.1. A woman with current wealth X has the opportunity to bet an amount on the occurrence of an event that she knows will occur with probability P. If she wagers W, she will received 2W, if the event occur and o if it does not. Assume that the Bernoulli utility function takes the form u(x) = -e-rx with r>0. How much should she wager? Does her utility function exhibit CARA, DARA, IARA?Betty is looking for a job. She considers job opportunities intwo cities. Bettyís utility is given by y- x, where y is the lifetime income andx is the amount spent on buying a house. The income from City 1 fluctuatesalthough the house price is stable. On the contrary, the income from City2 is stable while the house price fluctuates. If she moves to City 1, Bettycan earn a lifetime income y1 with probability alpha and 1 + y1 with probability1-alpha . The house price in City 1 is x1. Moving to City 2 means that Bettycan earn an income of y2. However, the house price is x2 with probabilitygamma and 1 + x2 with probability 1-gamma . Do the following: (a) Write down theexpected utilities associated with living in the two respective cities, i.e., V1and V2. (b) Derive the condition under which Betty chooses City 1.
- Jin's Utility Function Wealth Utility (Dollars) 60,000 4,000 61,000 4,110 62,000 4,209 63,000 4,288 Refer to Table 27-1. If Jin's current wealth is $61,000, then O his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is not risk averse. O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is not risk averse. O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is risk averse. his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is risk averse.3. In the second example, we will consider the case where the insurance contract involves a deductible this is an amount which is deducted from the final pay-out of the insurance firm in the case of a loss. In other words, the consumer bears this part of the loss herself. For this problem, assume a risk-averse, expected utility maximizing consumer with initial wealth wo who faces a potential loss of size L which will occur with probability p. Her utility-of-final-wealth function is denoted by u(.). Suppose that the consumer can purchase insurance coverage of C > 0 units of wealth from a perfectly competitive insurance firm at a premium of 7 per unit of coverage, but that the firm charges an additive deductible: if C units of insurance is purchased, the insurance firm pays out (C – d) if the loss occurs, where d 20 is a fixed amount independent of C. (a). For this problem, state the consumer's expected utility function. (b). Set up the consumer's utility maximization problem and find…Q1. A farmer believes there is a 50-50 chance that the next growing season will be abnormally rainy. His expected utility function has the form Expected utility = 0.5lnYNR + 0.5lnYR Where and represent the farmers income in the state of ‘normal rain’ and ‘rainy’ respectively. Suppose the farmer must choose between two crops that promise the following income prospects Crop YNR YR Wheat $83,000 $10,000 Maize $83,000 $15000 What mix of wheat and maize would provide maximum expected utility to this farmer?
- Economics Shawn's consumption is subject to risk. With probability 0.75 he will enjoy 10000 in consumption, but with probability 0.25 he will have only 3600. His utility function for consumption is given by v(c) = Vc. -What is the expected value of Shawn's consumption? -What is his expected utility? -What is his certainty equivalent of having 10000 with probability 0.75 and 3600 with probability 0.25?Suppose that Natasha's utility function is given by u(I) = √/10/, where I represents annual income in thousands of dollars. Is Natasha risk loving, risk neutral, or risk averse? Explain. A. She is risk averse because her utility function exhibits diminishing marginal utility. OB. She is risk loving because her utility function exhibits increasing marginal utility. OC. She is risk neutral because her utility function exhibits constant marginal utility. Suppose that Natasha is currently earning an income of $40,000 (1 = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. Should she take the new job? Natasha should not take the new job because her expected utility of 19.85 is less than her current utility. (Round expected utility to three decimal places.)4. Kate has von Neumann-Morgenstern utility function U(x1,x2) = m7. She currently has $2025. a. Would she be willing to undertake a gamble that involves a gain $2875 with probability + and a loss of $1125 with probability ? Show your work and explain your answer. b. Would she be willing to undertake a gamble that involves a gain $2599 with probability and a loss of $800 with probability ? Show your work and explain your answer.