Please solve the following 1 to 5 questions If the insurance premium rate is 10%, the accident rate (probability of a loss) is 10%, the amount of the lossis $5000, then for a risk averse consumer the amount of insurance demanded isIf wages are uniformly distributed from $70 to $130, and if the expected cost of sampling for a new wage is$6, then sampling for a new wage will stop when wage equalslevel ofAll other things constant, a lower loss amount for a risk averse person results in aoptimal insurance demanded.If the discount rate (current interest rate) is 3%, then the present value of a bond that promisesnext year and $100 two years from now is equal to $200.In the presence of an external cost, the socially optimal quantity isthan the privately optimalquantity.

Meaning of Risk-Averse: The term risk-averse is that situation under which the investor takes…

If the insurance premium rate is 10%, the accident rate (probability of a loss) is 10%, the amount of the loss is $5000, then for a risk averse consumer the amount of insurance demanded is If wages are uniformly distributed from $70 to $130, and if the expected cost of sampling for a new wage is $6, then sampling for a new wage will stop when wage equals, All other things constant, a lower loss amount for a risk averse person results in a optimal insurance demanded. level of If the discount rate (current interest rate) is 3%, then the present value of a bond that promises next year and $100 two years from now is equal to $200. In the presence of an external cost, the socially optimal quantity is than the privately optimal quantity.

If the insurance premium rate is 10%, the accident rate (probability of a loss) is 10%, the amount of the loss is $5000, then for a risk averse consumer the amount of insurance demanded is If wages are uniformly distributed from $70 to $130, and if the expected cost of sampling for a new wage is $6, then sampling for a new wage will stop when wage equals, All other things constant, a lower loss amount for a risk averse person results in a optimal insurance demanded. level of If the discount rate (current interest rate) is 3%, then the present value of a bond that promises next year and $100 two years from now is equal to $200. In the presence of an external cost, the socially optimal quantity is than the privately optimal quantity.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 2MC

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You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current Salary. You look into opening a small grocery store. Suppose that the store has annual cost of $150,000 for labor, $60,000 for rent and $30,000 for equipment. There is one-half probability that revenues will be $20,000 and a half probability that revenue will be $420,000 a. In the low revenue Situation, what will your accounting profit or loss be? b. In the high revenue situation, what will your accounting profit or loss be? c. On average, how much do you expect your revenue to be?
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