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- Q1) An expected utility maximiser owns a car worth £60000£60000 and has a bank account with £20000£20000. The money in the bank is safe, but there is a 50%50% probability that the car will be stolen. The utility of wealth for the agent is u(y)=ln(y)u(y)=ln(y) and they have no other assets.Suppose that an individual is just willing to accept a gamble to win or lose $1000 if the probability ofwinning is 0.6. Suppose that the utility gained if the individual wins is 100 utils. What is expected gains/loss.An insurance company would like to offer theft insurance for renters. The policy wouldpay the full replacement value of any items that were stolen from the apartment. Someapartments have security alarms installed. Such systems detect a break-in and ring an alarmwithin the apartment. The insurance company estimates that the probability of a theft in ayear is .05 if there is no security system and .01 if there is a security system (there cannot bemore than one theft in any year). An apartment with a security system costs the renter anadditional £50 per year. Assume that the loss from a theft is £10,000 and that the insurancecompany is risk neutral and the renter would be willing to pay more than the expected loss toinsure against the loss of theft. What is the insurance company's break even price for a one year theft insurance policy for anapartment without a security system?
- The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: SIZE OFOUTLET DEMAND LOW HIGH Small $ 1,000 1,000 Medium 500 2,500 Large 0 3,000 For what range of probability that demand will be high, will she decide to lease the medium facility?If patient insurance inquiries arrive at Blue Choice insurance with a mean rate of 3.6 calls per minute, the exponential probability of waiting more than 0.5 minutes to get the next inquiry call is _____. Question 6Select one: a. 0.2407 b. 0.1222 c. 0.5000 d. 0.1653Avicenna is a major insurer that offers five-year life insurance policies to 65 year-olds. If the holder of one of these policies dies before the age of 70 years, the company must pay $213,000 the beneficiary of the policy. Avicena executives are considering the possibility of offering these policies to $9,380 each one. Suppose there is a 4% probability that the insured will die before the 70 age of years and a 96% probability that she will live to 70 age.If Avicena executives know they will sell many of these policies, should they expect to make or lose money by offering them? How much would they win or lose?To respond, take into account the price of the policy and the expected value of the amount paid to the beneficiary.
- Suppose that there are two types of workers: high and low. Employers cannot distinguish between different types during an interview. Employers value high type at $200,000 and low type at $100,000. Employers are in a competitive market (i.e. zero profit applies). High type workers have a reservation wage of 140,000 and low type workers have a reservation wage of 80,000. Suppose that 50% of all workers are high type. The productivities, reservation wages, and the probabilities are common knowledge). What wage would the employers offer? Please explain the solution!1 A car dealer has established that 40% of his potential customers prefer single cab cars while 60% prefer double cab cars. From a recent survey among his existing clients, he obtained additional information which indicates that 15% of clients who bought single cab cars prefer air conditioning while 65% of clients who bought double cars prefer air conditioning.Required:a) What is the probability that a client who bought a single cab does not prefer air conditioning? (5)b) What is the probability that a client prefers a double cab with air conditioning?The data from 200 machined parts are summarizedas follows:y yesdepth of boreE, noabovebelowedge conditioncoarsetarget15target10moderatesmooth25205080(a) What is the probability that a part selected has a moderateedge condition and a below-target bore depth?(b) What is the probability that a part selected has a moderateedge condition or a below-target bore depth?(c) What is the probability that a part selected does not have amoderate edge condition or does not have a below-targetbore depth?(d) Construct a Venn diagram representation of the events inthis sample space.
- David Barnes and his fiancée Valerie Shah are visiting Hawaii. At the Hawaiian Cultural Center in Honolulu, they are told that 2 out of a group of 8 people will be randomly picked for a free lesson of a Tahitian dance a. What is the probability that both David and Valerie get picked for the Tahitian dance lesson? (round 4 decimal places) b. What is the probability that Valerie gets picked before David for the Tahitian dance lesson? (round 4 decimal places) Time remaining: 01 :51 :45 Economics A dealer decides to sell an antique automobile by means of an English auction with a reservation price of $900. There are two bidders. The dealer believes that there are only three possible values, $7,200, $3,600, and $900, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue from selling the car is approximately Group of answer choices $3,600. $2,500. $3,900. $5,400. $7,200.The project manager of Good Public Relations gatheredthe data shown in Table 7.15 for a new advertisingcampaign.a. How long is the project likely to take? b. What is the probability that the project will take more than38 weeks?c. Consider the path A–E–G–H–J. What is the probability thatthis path will exceed 38 weeks?
