An individual A is represented by the utility function uA(x) = √x. Another individual B is represented by the utility function uB (x) = x. Both own a sure income of $400 and a risky income that pays $100 with probability 1/4 if it is a good day tomorrow and zero with probability 3/4 if it is a bad day tomorrow. Find the redistribution of their incomes and gambles that makes B as happy as possible, without making A worse off. After the redistribution, what is B’s utility?
Q: How to run a linear regression analysis on excel based on the following data: Fatalities Ln…
A: The objective of this question is to perform a linear regression analysis on the given data using…
Q: Which two curves in a monopolistically competitive market in the long run will be equal to each…
A: In line with a perfectly competitive market, the characteristics of a monopolistically competitive…
Q: For every price leve! given in the following table, use the graph to determine the profit-maximizing…
A: Total cost refers to the expenses which are incurred by the producer on the production of goods or…
Q: Grease Tech produces oil changes. The production of oil changes relies on both capital (K) and labor…
A: Marginal Product of capital is the additional output that is produced by hiring an additional unit…
Q: Suppose there are two types of passengers: business travelers (B) and vacationers (V). The demands…
A: Price discrimination is a sales strategy of selling the same product or service to different…
Q: 1. The diagram below illustrates a decrease in the long-run supply of a commodity. To the right of…
A: Quantity supplied refers to the specific quantity of the commodity that the producer sells at a…
Q: Consider a market with the following supply and demand. (It may help to draw a graph for these…
A: Since you have posted a question with multiple sub-parts, we will provide the solution only to the…
Q: 10.2. Missing insurance markets. There are many missing insur- ance markets. Consider the following…
A: The scenario in which one party takes on more risk because that party knows they do not have to bear…
Q: 7. On July 19, 2020, you picked up the Wall Street Journal and observed the following T- Quote. Find…
A: Given InformationMaturity1/4/21Face Value (FV)100Days to Maturity (n)169Bid Quote (%)5.08%Asked…
Q: deman curve, P = 30 - 5Q market supplly curve, P = 6+Q external cost, d =. 6 a) socially…
A: The demand curve equation is given as The market supply curve equation is The external cost is
Q: A monopolist faces the following demand curve: Price $30 $25 $20 $15 $10 $5 so Refer to Table 15-4.…
A: Monopoly is a form of imperfect competition. There is one firm. The number of consumers is high.…
Q: suppose in the short run the amount of machines she has is fixed at 27. How many mixers should she…
A: The production function is given byHere, y is the quantity of baklava produced, and x1 and x2 refer…
Q: Suppose two countries, A and B, trade two goods, Good 1 and Good 2. Production of both goods…
A: Heckscher ohlin trade:This theory states that when a country has more labor/capital abundance then…
Q: Which of the following properties characterizes a perfectly competitive market? [(i) through (iv)…
A: The objective of the question is to identify the properties that characterize a perfectly…
Q: Which is CORRECT about information asymmetry and adverse selection a. Information asymmetry refers…
A: This can be defined as a situation in economics where asymmetric information between buyers and…
Q: This graphic was created by David Leonhardt and is based on data from Piketty, Saez, and Zucman. For…
A: The grey line labeled "1940" shows the income growth for each percentile of the income distribution,…
Q: In a perfectly competitive model a) economies of scale are large relative to the size of the market…
A: A perfectly competitive model refers to a market situation at which there are many buyers and…
Q: Supposed that a small open economy is running a trade deficit. The government enacts protectionist…
A: When a small open economy runs a trade deficit, it means that it is importing more goods and…
Q: 5. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy…
A: The Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) are concepts in…
Q: The estimated cost to produce x items is given by the function: C(x)= 0.004x² + 5x + 6000 Determine…
A: Marginal Cost (MC):Definition: Marginal cost is the additional cost incurred by producing one more…
Q: 2. The graph below shows the AD-AS model in short-run equilibrium at price level Po and level of…
A: Note: Since you have posted a question with multiple sub-parts, we will provide the solution only to…
Q: Suppose that the government of Smallville spends $2 trillion in 2020 and receives tax revenues of…
A: The government spends a specific amount for which they expect a suitable return. However, there…
Q: A decrease in the demand for bitcoin has the immediate effect of and the subsequent effect of…
A: A decrease in the demand for Bitcoin has the immediate effect of decreasing the purchasing power of…
Q: A single pass rice mill was tested for 30min. and gave the following results: input paddy 10000 kg,…
A: The provided question has been answered using theories and calculations of 'Agribusiness…
Q: Imagine a firm with a marginal abatement cost ( MAC) function equal to: MAC = 70 - 10E. The…
A: Marginal abatement costs that are being used for decreasing an additional pollution unit. The policy…
Q: Suppose that the monopolist can produce with total cost: TC= 10Q. Assume that the monopolist sells…
A: A monopoly is a type of market where a single seller has full control over the market, and no close…
Q: The following graph gives the demand (D) curve for water services in the fictional town of…
A: A monopoly firm produces at the intersection of MR and MC curves. Hence, the monopoly outcome occurs…
Q: Consider a perfectly competitive market that consists of 20 consumers with identical preferences.…
A: Equilibrium price and quantity:Price and quantity are in equilibrium at the point in the demand…
Q: Econoline Company produces only two goods and they operate with limited resources. The production…
A: The Production Possibility Frontier in economics is a graphical representation that shows the…
Q: Questions 1. Even though Professor Ramirez deviated from the college’s policy regarding…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: A) If both firms make their decisions at the same time and follow maximin (low-risk) strategies,…
A: Since you have posted a question with multiple sub-parts, we will provide the solution only to the…
Q: Consider the following consumer’s problem: max…
A: Since you have posted a question with multiple sub-parts, we will provide the solution only to the…
Q: Oil up $1.50 a barrel as demand recovery seen tightening supply" If the diagram below represents the…
A: The interaction between buyers' preferences and product availability by the supplier influences…
Q: 13. Countries that restrict foreign trade are likely to chave more frme with d forgo the additional…
A: Let's evaluate each option:Option a. This statement is generally correct. When a country imposes…
Q: Questions: (a) Comparing Expected Values with & without the Bonus, Calculate the Expected Benefit to…
A: 1. Without the bonus, the expected benefit to the state is calculated as follows:2. With the bonus,…
Q: In Orlando, 135 people are willing to spend an hour working as yoga instructors for an hourly wage…
A: The amount of labour supplied at a specific wage rate is displayed on the labour supply curve. It is…
Q: Question 1 Define the output gap and explain in detail the relationship between the output gap and…
A: The output gap is a key concept in macroeconomics, measuring the difference between the actual…
Q: Suppose a perfectly competitive firm’s short-run total cost function is STC=(q-5)^3 What is the…
A: In a perfectly competitive market, there are several key features - 1 ) Many Buyers and Sellers 2…
Q: Pretend that the country is in a normal economic climate. Suppose that the Federal Reserve,…
A: The Federal Reserve has announced to initiate the purchase of $2 million worth of treasury and other…
Q: A recession occurs as economic growth slows for Otwo consecutive quarters four quarters within two…
A: A recession is a temporary period of economic slowdown, generally defined as a fall in GDP over…
Q: What ethical issues could an online venture that sells Houdoran coffee beans address, encounter, or…
A: The objective of the question is to identify and discuss the potential ethical issues that an online…
Q: Using the Solow growth model suppose that there is a hurricane coming toward a city. Because it is…
A: Solow model in economics is the long-run growth model that studies the changes in economic growth of…
Q: One study presented in the text calculated the cost per life-year saved for various medical…
A: Thе concеpt of diminishing marginal product of mеdical carе rеfеrs to a situation whеrе thе…
Q: 7. A monopolist in the steel industry engages in Block Pricing. The prices the firm charges are…
A: A monopolist is able to use price discrimination. Price discrimination occurs when different prices…
Q: Use the payoff matrix below to answer the next two questions. 30. a. b. C. d. Topco does not…
A: In economics, a game theory is a situation in which each player chooses a strategy by knowing the…
Q: An Edgeworth box is shown for individuals M and N. In total, there are 100 units of good 'X and 80…
A: The Edgeworth Box is a graphical representation in microeconomics that illustrates the potential…
Q: Suppose that the equilibrium real federal funds rate is 6 percent and the target rate of inflation…
A: The Taylor Rule is a guideline for central banks to set interest rates based on economic conditions.…
Q: Consider the only internet service provider in a small town, which you can assume operates as a…
A: Monopoly is a form of imperfect competition. There is one firm. The number of consumers is high.…
Q: Consider a factory, located in the middle of nowhere, producing a nasty smell. As long as no one is…
A: The objective of the question is to understand the concept of externalities in economics, and how it…
Q: Hotel Nemo is the only under-sea hotel in the nation. The graph shows its demand curve and marginal…
A: A process that business firms undergo to ensure the best output and price levels are achieved in…
Step by step
Solved in 3 steps with 8 images
- Gary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary’s boat wins, Donna would give him $31. If Gary’s boat does not win, Gary would give her $31. Gary’s utility function is p1x^21+p2x^22, where p1 and p2 are the probabilities of events 1 and 2 and where x1 and x2 are his wealth if events 1 and 2 occur respectively. Gary’s total wealth is currently only $80 and he believes that the probability that he will win the race is 0.3. Which of the following is correct? (please submit the number corresponding to the correct answer). Taking the bet would reduce his expected utility. Taking the bet would leave his expected utility unchanged. Taking the bet would increase his expected utility. There is not enough information to determine whether taking the bet would increase or decrease his expected utility. The information given in the problem is self-contradictory.Donna just paid $800 for a new iPhone. Apple offers a two year extended warranty for $200 and Donna is considering purchasing it. She has utility given by U(X)=√X. Without the extended warranty, the iPhone becomes worthless if it breaks. What is the minimum probability, p, that the iPhone breaks in the next two years that will cause Donna to prefer to purchase the extended warranty? p= ✓the warranty. If the probability that her phone breaks is p=0.25, Donna will prefer toGary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary's boat wins, Donna would give him $31. If Gary's boat does not win, Gary would give her $31. Gary's utility function is p1x^21+p2x^22, where P₁ and p2 are the probabilities of events 1 and 2 and where x₁ and x₂ are his wealth if events 1 and 2 occur respectively. Gary's total wealth is currently only $80 and he believes that the probability that he will win the race is 0.3. Which of the following is correct? (please submit the number corresponding to the correct answer). 1. Taking the bet would reduce his expected utility. 2. Taking the bet would leave his expected utility unchanged. 3. Taking the bet would increase his expected utility. 4. There is not enough information to determine whether taking the bet would increase or decrease his expected utility. 5. The information given in the problem is self-contradictory.
- Amy likes to go fast in her new Mustang GT. Their utility function over wealth is v(w) where w is wealth. If Amy goes fast she gets an increase in utility equal to F. But when Amy drives fast, she is more likely to crash: when she drives fast the probability of a crash is 10%, but when she obeys the speed limit, the probability of a crash is only 5%. Amy's car is worth $2000 unless she crashes, in which case it is worth $0. If Amy doesn't have insurance, driving fast isn't worth the risk, so she will alway obey the speed limit. If Amy is offered an insurance contract with full insurance for a premium P with the deductible D, which of the inequalites below is her incentive compatibility constraint that makes sure that she will still obey the speed limit even when she is fully insured? 0.05U(2000 – P – D) + 0.95U(2000 – P) > 0.05U(0 – P – D + 2000) + 0.95U(2000 – P) 0.05U(2000 – P – D) + 0.95U(2000 – P) > 0.1(U(2000 – P – D) + F) + 0.90(U(2000 – P) + F) 0.05U(2000 – P – D) + 0.95U(2000)…Sadija has a concave utility function of U(W) = In(W). She has inherited a ring from a relative, but she is unsure about its value. She believes that it is worth £6,000 with a probability of 1/3 and £3,000 with a probability of 2/3. a. Ahmed would like to buy the ring from her. Which price would he need to offer for Sadija' utility to remain unchanged after the sale? b. In fact, Ahmed offers £4,000 for the ring. What can you infer about Ahmed?Consider a household that possesses $200,000 worth of valuables such as jewelry. This household faces a 0.02 probability of a burglary, where she would lose jewelry worth $70,000. Suppose it can buy an insurance policy for $15,000 that would fully reimburse the $70,000. The household's utility function is U(X) = 4X⁰.5 Should the household buy this insurance policy? The household should not buy this policy. What is the actuarially fair price for the insurance policy? If the insurance is fair, then the cost of the insurance policy is $ 1400. (Enter your response rounded to two decimal places.) What is the most the household is willing to pay for an insurance policy that fully covers it against loss? The most the household would pay for such a policy (p) is S (Enter your response rounded to two decimal places.)
- To go from Location 1 to Location 2, you can either take a car or take transit. Your utility function is: U= -1Xminutes -5Xdollars +0.13Xcar (i.e. 0.13 is the car constant) Car= 15 minutes and $8 Transit= 40 minutes and $4 What is your probability of taking transit given the conditions above? What is your probability of taking transit if the number of buses on the route were doubled, meaning the headways are halved? Remember to include units.Microeconomics Wilfred’s expected utility function is px1^0.5+(1−p)x2^0.5, where p is the probability that he consumes x1 and 1 - p is the probability that he consumes x2. Wilfred is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2500 with probability p = 0.4 and $3700 with probability 1 - p. Wilfred will choose the sure payment if Z > CE and the lottery if Z < CE, where the value of CE is equal to ___ (please round your final answer to two decimal places if necessary)Max is thinking of starting a pinball palace near a large Melbourne university. His utility is given by u(W) = 1 - (5,000/W), where W is his wealth. Max's total wealth is $15,000. With probability p = 0.7 the palace will succeed and Max's wealth will grow from $15,000 to $x. With probability 1 - p the palace will be a failure and he’ll lose $10,000, so that his wealth will be just $5,000. What is the smallest value of x that would be sufficient to make Max want to invest in the pinball palace rather than have a wealth of $15,000 with certainty? (Please round your final answer to the whole dollar, if necessary)
- Max Pentridge is thinking of starting a pinball palace near a large Melbourne university. His utility is given by u(W) = 1 - (5,000/W), where W is his wealth. Max's total wealth is $10,000. With probability p = 0.9 the palace will succeed and Max's wealth will grow from $10,000 to $x. With probability 1 - p the palace will be a failure and he’ll lose $5,000, so that his wealth will be just $5,000. What is the smallest value of x that would be sufficient to make Max want to invest in the pinball palace rather than have a wealth of $10,000 with certainty? ____ (Please round your final answer to the whole dollar, if necessary)Anna is risk averse and has a utility function of the form u(w) pocket she has €9 and a lottery ticket worth €40 with a probability of 50% and nothing otherwise. She can sell this lottery ticket to Ben who is risk neutral and has €30 in his pocket. Find the range of prices that would make such a transaction possibleSuppose a person chooses to play a gamble that is free to play. In this gamble, they have a 10% chance of $100.00, and a 90% chance of nothing. Their utility function is represented in the following equation: U=W 1/2 where W is equal to the amount of "winnings" (or the income). Suppose now Brown Insurance Company offers the person the option of purchasing insurance to insure they will win the $100. What is the minimum amount Brown Insurance would charge you to insure your win? 0.90 O. 99 01 O 10