Mr Usu has an expected utility function with u(x) = x0.5. He is analyzing an investment opportunity that promises to pay out $1,160 with prob. 0.6 and $2,800 with prob. 0.4. What is the expected utility of this opportunity?
Q: A nation will import a good if its no-trade, domestic: price is equal to the world price. price is…
A: Import refers to the purchase of goods and services by a nation from the rest of the world.
Q: Suppose the United States has two utilities, Commonweath Utilities and Consolidated Electric. Both…
A: Sustainable development is one of the most debated topics in the current scenario. Governments over…
Q: In what way might society gain if the Bank of Canada implements an anti-recessionary policy instead…
A: An expansionary policy or anti-recessionary policy of the Bank of Canada refers to the policy of the…
Q: Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is…
A: The investment level and the interest rates have an inverse relationship. Interest rates influence…
Q: In 2020, the annual wage "ceiling for workers aged 62-64 was $18,240 How large of a monthly Social…
A: The annual wage ceiling for workers who belong to the age group of 62-64 is $18,240. The maximum…
Q: pose Joe and Jill are the only two people in the small town of Andover. Andover has land available…
A: MSB is the total benefit received by society as a whole for producing each additional unit of the…
Q: Proportional Supply-side Progressive Structural Fiscal policy Data lag Transmission lag Transfer…
A: Transmission lag refers to the time delay between the implementation of a fiscal policy measure…
Q: Outlay Order by Size (2 2 3 Social Security Medicare interest payments on the nondefense…
A: A government is a framework or association that practices authority and command over a particular…
Q: If a 3D printer increased in cost at exactly the inflation rate, what was the inflation rate if the…
A: The inflation rate is the rate of the general rise in prices in an economy over some time. Inflation…
Q: Question 1: The profit maximization problem of the firm in the two-period model with investment is…
A: The first-order conditions can be found out by taking partial derivatives of the given profit…
Q: 1 1 09. Consider a production function of the form y=AK2 L2 where y is units of output, K is units…
A: o calculate the additional output, we can first calculate the output with 16 people employed and…
Q: Perfect competition is a market structure Group of answer choices in which any firm would have…
A: A competitive market is a market structure characterized by many buyers and sellers offering…
Q: Refer to Table. What is the lowest price at which this firm would operate in the short run and…
A: Total Fixed cost is independent of the level of output and it is even incurred even at zero level of…
Q: Complete the following table by matching each of the scenarios to the concept of resale price…
A: Product bundling, predator pricing, and resale price maintenance are among various practices of a…
Q: A firm has a division which produces chemical Y, whose average total costs are ATC = 50 + 2Q (where…
A: In economics, the total cost is the cumulative expense that a firm incurs to produce its final…
Q: Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is…
A: The objective of the question is to understand the impact of an increase in labor productivity and…
Q: UTILITY U L!! 800 1,300 1.800 WEALTH (Dollars) Refer to Figure 28-3. Suppose the vertical distance…
A: A utility function is a formula that expresses a decision-maker's preferences among a range of…
Q: The graph shows the rental market for apartments in Dayton, Ohio If the city government imposes a…
A: A "price ceiling" is a government-imposed limit on how much can be charged for a particular good or…
Q: Consider the graph. What is the value of profit when this firm is maximizing profit? Enter the…
A: The profit maximising point will be that point where marginal revenue equals marginal costs.…
Q: Conduct a focused literature review concerning the field of Human Resource which includes four basic…
A: Human resource management (HRM) encompasses a wide range of activities and strategies that are…
Q: Above is the payoff matrix for company A and company B as they choose thek advertising strategies.…
A: A payoff matrix is a table used to show the payoffs or outcomes of different strategies of the…
Q: (Figure: Cost Schedule) Quantity Fixed Cost 0 1 2 234 3 4 5 A) $13 B) $9.40 C) $47 $11 11 11 11 11…
A: Average Total Cost represents the average cost incurred to produce one unit of output. It includes…
Q: What is the optimal productivity rate for a two-person carpentry crew that has a measured…
A: Productivity of input refers to the efficiency and effectiveness with which a particular resource or…
Q: For the Minnie Mice Company, the elasticity of demand is −6 and the profit-maximizing price is 30.…
A: Learner's Index is the index developed by British economist Abba Learner to measure the market power…
Q: Suppose you earned $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket…
A: To calculate the total taxes paid, we need to determine the amount of income that falls into each…
Q: The function / (t) = -0.2t³ + 3² +100 for 0 ≤ t ≤ 9 gives the CPI of an econom to the beginning of…
A: CPI stands for Consumer Price Index. It is a commonly used economic indicator that measures changes…
Q: Neoclassical economics does NOT argue _______ Question 1 options: GDP is determined by supply…
A: Neoclassical economics is a school of economic thought emphasizing individual rationality, market…
Q: look at the influence of mileage on the sale price of each brand ofautomobile. Postulate the…
A: The objective of the question is to understand the influence of mileage on the sale price of two…
Q: Based on the Taylor Rule use the following information to calculate the target federal funds rate.…
A: The information provided is VariableValueTarget inflation rate2%Current inflation rate4%Real…
Q: If the economy booms in the United States while going into recession in other countries, the U.S.…
A: The trade balance is the difference between the export and import. The trade deficit occurs when…
Q: Refer to Figure 3-2. A decrease in the expected future price of the product would be represented by…
A: Supply:Supply is the total number of goods and services produced by a producer is called supply.…
Q: Question 14 For a monopoly; what is the Quantity that maximizes profit? Quantity Price Total Revenue…
A: A monopoly occurs when a single company or entity has exclusive control over the production or…
Q: Paul hires Amy to manage his bakery shop. The following table gives the shop's profits (without…
A: Applying economic principles and methods to organizational decision-making, managerial economics…
Q: question #18 Wage $5.40 $5.00 $4.90 0 D Quantity of Labor Slabor + tax Slabor Refer to the above…
A: Tax refers to the sum of money that the government collects from the producers and consumers for…
Q: The demand function for a certain brand of CD is given by p = −0.01x2 − 0.2x + 7 where p is the unit…
A: Producer surplus is an economic measure that represents the difference between the actual amount a…
Q: A utility maximizing consumer with preferences u(x, y)-x¹/2y1/2 allocates 60 dollars towards the…
A: Utility refers to the level of satisfaction a consumer obtains from the consumption of goods or…
Q: At the minimum wage of $6 per hour, the level of unemployment is workers are $ million. Now suppose…
A: Market equilibrium implies a condition in which the quantity demanded by consumers in a market is…
Q: Among the principal exports of the United States are agricultural products. True or False
A: Products and services created in one nation and supplied to other countries are referred to as…
Q: Crab Puffs 500 450 400 350 300 250 200 150 100 50 0 Production Possibilities Curve (PPC) 7 8 9 10 11…
A: A production possibility curve (PPC), also known as a production possibility frontier (PPF), is a…
Q: Use the figure below to answer the following question(s): Sm1 Sm2 MINI 125 175 250 Rate of Interest…
A: Transaction demand for money refers to the demand for money that arises from the need to facilitate…
Q: A couple is deciding where they will go out for an evening. They can go out alone, or go with the…
A: Nash equilibrium is a sub-topic of game theory in which players play games and use strategy and…
Q: a. b. C. Draw the annual migrant labor market diagram for this case. Label the relevant prices and…
A: The labor market is the marketplace where the workers who are willing and able to work at the…
Q: Is it in the public interest to tax cigarettes? Explain your position using some of the economic…
A: A tax is a charge put by the government of any country on individuals and organisations. Funds…
Q: To say that markets are "efficient" implies that Select one: firms produce the amount and type of…
A: A marketplace location is where consumers and sellers meet each other to trade goods and services.…
Q: an Problem 5. Consider following price competition between 2 firms. Both firms choose their prices…
A: In game theory, a Nash equilibrium is a situation in a non-cooperative game in which no player has…
Q: The figure shows the demand and cost curves facing a monopoly in the short run. The…
A: A monopoly firm produces at the intersection of MR and MC to maximize its profit or minimize its…
Q: consider 2 cities, a and b in a region. assume city b has a greater localization and scope of…
A: Urbanization economies refer to the additional benefits including better job opportunities, access…
Q: Consumers' Surplus The demand function for a certain brand of CD is given by p = −0.01x2 − 0.3x + 19…
A: Consumer surplus is the cost they actually pay against the cost they are willing to pay. Usually,…
Q: Unit of Labor 0 1 2 3 4 5 6 Total Product 0 15 28 39 48 55 60 Product Price $ 2.20 2.0 1.80 1.60…
A: A firm should keep hiring labor until the marginal revenue product is more than the marginal cost of…
Q: Exhibit 7-11 Short-run cost curves schedule for pizzeria's hourly production Total Product O pizzas…
A: The Total Variable Cost (TVC) is the cost that varies with the level of output, and the Total Cost…
- Mr Usu has an expected utility function with u(x) = x0.5. He is analyzing an investment opportunity that promises to pay out $1,160 with prob. 0.6 and $2,800 with prob. 0.4. What is the expected utility of this opportunity?
Step by step
Solved in 3 steps with 1 images
- Studies have concluded that a college degree is a very good investment. Suppose that a college graduate earns about 75% more money per hour than a high-school graduate. If the lifetime earnings of a high-school graduate average $1,200,000, what is the expected value of earning a college degree?U(W) in an appropriate utility function, where W is the level of wealth. Which of the following is TRUE for a risk-loving investor? Select one: A. U[E(W)] < E[U(W)] B. U[E(W)] > E[U(W)] C. U[E(W)] = E[U(W)] = 0 D. U[E(W)] = E[U(W)]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.
- Leora has a monthly income of $20,736. Unfortunately, there is a chance that she will have an accident that will result in costs of $10,736. Thus leaving her an income of only $10,000. The probability of an accident is 0.5. Finally assume that her preferences over income can be represented by the utility function u(x) = 2ln(x).a) What is the expected income? What is Leora’s expected utility (you may leave in log form)? b) What is the certainty equivalent to her situation? What is the risk premium associated with her situation?c) What is the maximum that Leora would be willing to pay for a full insurance policy?d) Illustrate her expected utility, expected wealth, certainty equivalent, the risk premium and her willingness to pay for a full insurance policy in a diagram.Calculate the expected utility of John when he faces the risky prospect X = {4, 9, 16, 25; 0.2, 0.3, 0.3, 0.2} . His utility function isu ( x ) = 50 x − x 2 , where x is wealth. (Use two decimals) ________You are considering a $500,000 investment in the fast-food industry and have narrowed your choice to either a McDonald’s or a Penn Station East Coast Subs franchise. McDonald’s indicates that, based on the location where you are proposing to open a new restaurant, there is a 25 percent probability that aggregate 10-year profits (net of the initial investment) will be $16 million, a 50 percent probability that profits will be $8 million, and a 25 percent probability that profits will be −$1.6 million. The aggregate 10-year profit projections (net of the initial investment) for a Penn Station East Coast Subs franchise is $48 million with a 2.5 percent probability, $8 million with a 95 percent probability, and −$48 million with a 2.5 percent probability. Considering both the risk and expected profitability of these two investment opportunities, which is the better investment? Explain carefully.
- 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 if it does not. Assume that the Bernoulli utility function takes the form u(x) = with r > 0. How much should she wager? Does her utility function exhibit CARA, DARA, IARA? Alex plays football for a local club in Kumasi. If he does not suffer any injury by the end of the season, he will get a professional contract with Kotoko, which is worth $10,000. If he is injured though, he will get a contract as a fitness coach worth $100. The probability of the injury is 10%. Describe the lottery What is the expected value of this lottery? What is the expected utility of this lottery if u(x) = Assume he could buy insurance at price P that could pay $9,900 in case of injury. What is the highest value of P that makes it worthwhile for Alex to purchase insurance? What is the certainty…Consider the following prospects – A: (0.5, 0, 0.5: $100, $60, $10) B: (0, 0.9, 0.1: $100, $60, $10) C: (0.2, 0.5, 0.3: $100, $60, $10) D: (0.4, 0.2, 0.4: $100, $60, $10) Show that D>A>B>C is consistent with expected utility theory and that this preference ordering implies “risk-loving” preferences. Show that C>B>D>A is consistent with the expected utility theory.A risk-averse manager is considering two projects. The first project involves expanding the market for bologna; the second involves expanding the market for caviar. There is a 10 percent chance of a recession and a 90 percent chance of an economic boom. During a boom, the bologna project will lose $10,000, whereas the caviar project will earn $20,000. During a recession, the bologna project will earn $12,000 and the caviar project will lose $8,000. If the alternative is earning $3,000 on a safe asset (say, a Treasury bill), what should the manager do? Why?
- Let U(x)= x^(beta/2) denote an agent's utility function, where Beta > 0 is a parameter that defines the agent's attitude towards risk. Consider a gamble that pays a prize X = 10 with probability 0.2, a price X = 50 with probability 0.4 and a price X = 100 with probability 0.4. Compute the agentís expected utility for such gamble and find the value of Beta such that the agentis risk neutral? Suppose B= 1, what is the certainty equivalent of the gamble described above? What is the Arrow-Pratt measure of absolute risk aversion?Explain why the variance of an investment is a useful measure of the risk associated with itLeo owns one share of Anteras, a semiconductor chip company which may have to recall millions of chips. The stock currently trades at $100/share. Leo believes the probability that they have to recall the chips is 50%. If the chips have to be recalled, the stock price will be cut in half, but otherwise it will remain $100. The expected value of Leo's share is ______ Assume Leo has the utility function, U(X)=√X. The minimum price Leo would accept to sell his share is _______ Leo's risk premium is ________
