Suppose that next year there is a 5% chance of tornados causing $5 million in damages, a 1% chance of tornados causing $70 million in damages, and a 0.25% chance of tornados causing $850 millian in damages. What is the expected value of damages from tornados next year? a.$30,150,000 b.$3,075,000 c.$2,500,000 d.$308,333,333

Suppose that next year there is a 5% chance of tornados causing $5 million in damages, a 1% chance of tornados causing $70 million in damages, and a 0.25% chance of tornados causing $850 millian in damages. What is the expected value of damages from tornados next year? a.$30,150,000 b.$3,075,000 c.$2,500,000 d.$308,333,333

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter32: Building Theories To Explain Every Day Life: From Observations To Questions To Theories To Predictions

Section: Chapter Questions

Problem 11QP

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3. Consider a world in which production of a good or service consists of a number of definitive tasks, which must all be performed correctly for the product to have positive value. Each task is filled by a single worker i whose skill level qirepresents the probability the worker performs her task correctly. Mathematically, if there are n tasks in the production of a good, and average production per worker with one unit of capital is 1 when all tasks are performed correctly, the production technology can be represented as: A) Give an example of an industry for which this might be a good model of production. What does this production function imply about the tradeoff between quality and quantity of labor in a given task? In this, how does it differ from a Cobb Douglas production function? B) Find the marginal product of increasing the skill of the ith worker. Suppose now there were two firms in the same industry that will bid for workers, and can pay them differentially according to…