Pleas help with parts D and E Question 2Willy owns a small chocolate factory, located close to a river that occasion-ally floods in the spring, with disastrous consequences. Next summer, Willy1plans to sell the factory and retire. The only income he will have is the pro-ceeds of the sale of his factory. If there is no flood, the factory will be worth$500,000. If there is a flood, then what is left of the factory will be worth only$50,000. Willy can buy flood insurance at a cost of 0.10 for each $1 worth ofcoverage. Willy thinks that the probability that there will be a flood this springis 0.1. Let cF denote dollars if there is a flood and CNF denote dollars if there isno flood. Willy's utility function is u = √e. Willy is trying to decide how muchflood insurance (K) to buy.(a) What is the risk attitude of Willy? Why?(b) Please find the expected wealth and expected utility of Willy.(c) Find the equation that shows the relationship between cF and CNF.(d) Find the optimal level of CF, CNF and K.(e) Suppose the insurance is unfair, and y = 0.2. What are the optimal levelof CF, CNF and K.

Given information Worth of the factory without flood=$500000 Worth of the factory with flood=$50000…

Answered: Willy owns a small chocolate factory,…

Willy owns a small chocolate factory, located close to a river that occasion- ally floods in the spring, with disastrous consequences. Next summer, Willy

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.11P

See similar textbooks

Related questions

Q: The following graph shows a monopolist firm selling good A. Use the given information to answer

A: In the monopoly market profit is maximized where the MR =MC. Monopoly market is characterized by the…

Q: Problem Solving: Copy the questions and analyze the following demand problem. Answer Emphasize the…

A: Demand refers to the quantity that a consumer wishes to purchase at a given price in a given period…

Q: they did by lottery-for free. That left 53,000 New Yorkers without tickets. It was a scalper's…

A: *Answer: (a) At the church-set price of $0 per ticket, quantity demanded was 93,000 tickets while…

Q: Employee compensation in the form of health insurance is currently subject to personal taxation,…

A: Introduction Insurance Insurance is one way to manage risk. When you buy insurance, you are buying…

Q: In a stadium there is only one seller of bratwursts (sausages). The inverse demand tion is given by:…

A: Monopoly market is characterized by presence of single firm. Single firm is considered as price…

Q: Hi. I'm a little confused on how the short run supply curve of a price taking firm is determined. Do…

A: In the perfectly competitive market, the firm is price taker only. It can not influence the market…

Q: Critically discuss Rostow’s 5 stages of Growth theory and the criticism levelled against it? How can…

A: Rostow’s Growth Theory One of the most influential development theories of the 20th century is…

Q: Explain how an economy can return back to a long run equilibrium following a negative supply shock,…

A: In most cases, the economy self-adjusts to the long-run equilibrium without government intervention.…

Q: 1) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Given the figure below and and information on recycling markets. D shows the market demand for…

A: The recycling ratio is the ratio of the total number of cans that are produced from recycled cans to…

Q: II. Graphing: Using the Total Production Frontier below, make a TPF graph with proper point and axis…

A: Plotting the workers on horizontal axis and total production of the vertical axis, the graph is…

Q: IV: GRAPHING: Using the data above, graph properly and with proper labels the Market Equilibrium of…

A: As per table There are two quantities one represents demand and other is supply . As we know that…

Q: If a 10 cent tax is imposed on a supply curve with the function Qs = P - 2, the function…

A: supply is defined as the quantity of goods that the producers decide to sell in the market at any…

Q: What is your secure strategy? -What is your rival’s secure strategy? - If the two firms were…

A: Security strategies define the best of worst case scenario for a player. Lets find the secure…

Q: Which statement is not true? Commodity money cannot be fiat money and vice-versa. Commodity…

A: Money is something which is widely accepted by general public. It performs the various function such…

Q: a. Compute the opportunity cost in forgone consumer goods (millions of pounds of butter) for each…

A: Opportunity cost is the forgone value of second best opportunity in order to gain best opportunity.…

Q: d) What are the price and quantity if you a have fixed costs of 490? What is the profit? e) Consider…

A: Profit maximising is the point of equilibrium where MR= MC . Monopoly charges high price and and…

Q: Suppose total output (real GDP) is $1,000 and labor productivity is $5. We can conclude that the…

A: Please find the answer below. GROSS DOMESTIC PRODUCT (GDP): GDP measures the monetary value of…

Q: Explain the differences in the types of negotiation, negotiation tactics, and bargaining behaviors…

A: Negotiation refers to the dialogue between two or more people or parties to reach the desired…

Q: Which of the following is a condition that would cause a profit maximizing firm to exit? O A. Price…

A: A profit maximizing form is a firm that operates where Marginal Revenue is equal to the Marginal…

Q: Task II: Your manager asked you to answer the following: A) Define quantitative and qualitative…

A: Since you have asked a multi-part question, and according to the policy, we can only solve the first…

Q: What is meant by a sunk cost? Give typical sunk costs for an IT project.

A: Sunk costs are a type of fixed costs and they do not change irrespective of the levels of…

Q: Define aggregate demand and aggregate supply. 2) Give three reasons why the aggregate demand curve…

A: 1. Aggregate Demand (AD) AD simply means the total demand for goods and services at different prices…

Q: A surplus occurs when: more people want to buy a good than want to sell it.

A: Surplus can be depicted through following graph - Here, at price level equal to p1 . quantity…

Q: The table below shows the percentage change in quantity demanded of sending regular mail, of ending…

A: Price Elasticity is a proportion of how unequivocally purchasers respond to changes in cost. Your…

Q: A nominal value can increase when either prices or quantities or both increase. Select one: True…

A: A nominal value is an unadjusted value whereas the real value is an adjusted value.

Q: Choice DRUMS A B C D E 30 25 20 15 10 5 0 0 On the following graph, use the blue points (circle…

A: Opportunity cost refers to the sacrifice of the second best alternative when one particular…

Q: Suppose that the market demand function is given by Q=200-P, where Q is the total market quantity…

A: When the marginal costs are same we use the following formula to calculate cournot and stackleberg…

Q: H7

A: We know that The point/place at which the consumption is optimal is wherein the slopes of the IC and…

Q: I believe this is wrong. If I do 25 tons in Florin, and 15 Tons in Spain I will have a higher…

A: Introduction We have given data of Montoya steelworks which is in Florin. In Florin, it is the sole…

Q: You are planning to buy a new car before you move to a new place for a job after graduation. You are…

A: To make a better vehicle choice we formulate cash flow for both the vehicles and find their present…

Q: Assume that a country experiences a permanent increase in its saving rate. Which of the following…

A: A permanent increase in savings rate could impact various variables in the economy for long or short…

Q: The graph below plots the firm's total revenue curve: that is, the relationship between quantity and…

A: A curve's slope indicates the curve's steepness and direction at a certain location. It describes…

Q: There were 100,000 full-time workers and 50,000 part-time workers who prefer full-time work. 15,000…

A: The labour force encompasses all persons who work for a living, whether as employees, employers, or…

Q: What is the difference between Walrasian and Hicksian demand curves? Fully Explain with reference to…

A: The demand that a utility-maximizing consumer should have after accounting for their income, the…

Q: a. b. Consider the following game G: A B 4, -4 7,-7 8,-8 6,-6 X Y Is there a pure Nash equilibrium…

A: When Player 1 plays X, player 2 have the following strategies to play and their corresponding…

Q: 6. Supply and Demand The market for widgets has a perfectly inelastic supply curve. The demand curve…

Q: Suppose demand and supply for services of surgeons in Australia each day are given below, where…

A: Consumer surplus is the difference between the maximum willingness to pay by the consumer for a…

Q: The common traditional consensus among economists is that the central bank cannot target both…

A: The central bank can control inflation and recession by monetary policy tools, but it can target one…

Q: Its urgent hand write asap

A: A function establishes the relationship between one input and one output, or between numerous inputs…

Q: Read parts (i) to (iii) before answering. Answer all three parts on a single diagram. Assume that…

A: The relationship between the unemployment rate and the rate of inflation is represented by the…

Q: Please do it in 10 minutes will upvote

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: If you borrow money from your friend, Ned, with simple interest of 12%, find the present worth of…

A: Simple interest formula: A = P(1+rt) Where A is the final value P is the initial value (or present…

Q: b) A firm's total cost function is TC = 0.1Q³ -0.5Q² + 8Q + 10 and total revenue is TR = 52Q -0.25Q²…

A: As given TC = 0.1Q3 -0.5Q2+8Q +10 TR = 52Q - 0.25Q2 +8

Q: If wages in New Zealand are higher than in China, Select one: a.trading with China will hurt New…

A: International trade between individuals, businesses, and nations is essential to a contemporary…

Q: Please do it in 10 minutes will upvote I

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Problem 3 3,500 3,000 2,500 2,000 1,500 1,000 1900 1913 1929 1938 1950 1960 1973 Australia Canada…

Q: A firm in a competitive industry has the following short-run cost function: c(y) = y3/3 - 20y2…

A: Cost : TC= y3/3-20y2+310y Average Cost : AC=TC/y AC=y2/3-20y+310 Optimal output for a single firm…

Q: How much money can the Eastman Land and Cattle Company afford to spend now for a tractor trailer in…

A: Present value is the theory that said an amount of money today is value greater than that same…

Q: Economics Given the demand curve p=35-q^2 and the supply curve p=3+q^2, find the consumer surplus…

A: Consumer surplus is the price that a consumer pays for a product or service less than the price that…

Question

Pleas help with parts D and E

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Suppose you have inherited a few acres of landfrom a relative and you are considering what to dowith your inheritance. A farmer with land next toyours offers to buy your acres so he can expand hisgrazing area. How will you decide whether to sellyour land to the farmer? What factors should youconsider?
Q2 (b) Prove and interpret the following. i. MPC + MPS = 1 WV = 2/3 UV (Where UV=300)
Suppose the City of Oolagah is considering building a new water treatment facility to better address nutrient pollution from agricultural runoff. The plant will cost the city $4 million and take one year to build, after which point it will generate $375,000 per year in health benefits over a 20 year time horizon. a)The city has a discount rate of 6%. Please neatly fill in the table below. Time Benefits Costs Net Benefits Present Value of Net Benefits 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 b)What is the Net Present Value of this proposed project? If efficiency was the only objective for making the decision and we have fully accounted for all costs and benefits would you recommend the project go ahead or not? c) Now suppose that the new plan would only generate health benefits for 17 years. What is the NPV of this proposed project? If efficiency was the only objective for making the decision and we have fully accounted for all costs and benefits would you recommend the…
24Q) In the table which of following is true. ? Explain it early and correctly.
17) If Qs = -50 + 10p, and Qd = 400 - 20p, what is the equilibrium quantity?A) 25B) 146.6C) 360D) 120E) 100.
Topic is interestSuppose that i(m)= 0.1844144 and d(m) = 0.1802608What is the value of m?
A couples house is $192,00 and their auto is $9,500. Assume that their home is now appraised at $200,000 and the value of their automobile has dropped to $8,700. Calculate and characterize the effects of these changes on their net worth.
Consider 2 people: Jonathon already purchased a non-refundable ticket to a tournament basketball game in a town 100 miles away. Haruka, who also lives 100 miles from the game, intends to go to the game and received a free ticket. On the night of the game, a blizzard is forecasted for the region. a. Who is more likely to go to the game? b. Is this rational? C. What decision-making bias does this problem illustrate?
The city is contemplating making street improvements on a street with only two residents. The marginal cost of the project would be $5,000. One of the residents anticipates a marginal benefit of $3,000. At least how much will the marginal benefit of the other resident need to be to make this street project efficient? Multiple Choice O $5,000 $8,000 $2,000 $3,000 4
Why might private markets tend to provide too few incentives for the development of new technology?
On Tuesday 4 October this year, the Minister for the Environment, Tanya Plibersek, announced a new strategy to protect Australia’s threatened plant and animal species. The Saving Native Species Plan will cost $224.5 million. (a) How would you define the benefits of this expenditure? (b) Could the economic benefits be quantified?
10 The critical value for a 5 percent level of significance is: a 1.493 b 1.656 c 1.761 d 1.873