Your utility function is given by M1/2. You have $100 and are planning to invest in a venture where you can win or lose 50 with equal probability. Will you accept the venture? What is the minimum gain you need to make in the good scenario such that you will invest in the venture?
Q: Year 1 2 Income $10,000 $10,000 Blank 1 Price of Good X $5 $10 QD of Good X 10 units 8 units Using…
A: The midpoint method of calculating price elasticity of demand is a formula used to measure the…
Q: A severe negative supply shock occurs when there is a significant reduction in the supply of key…
A: Supply is the number of goods and services the supplier is willing and able to sell at the market.…
Q: A particular item in the Picasso Paints product line costs $7 each to manufacture. The fixed costs…
A: The profit is the difference between the total revenue and total cost. The total cost is sum total…
Q: f Q = 100/p and c(q) = q2, what is the optimal level of output for the monopolist
A: A monopoly market is a type of market in which there will be only one seller who would charge a…
Q: Consider a Duopoly model, in which two firms decide a quantity simultaneously. The market demand is…
A: Cournot equilibrium is a concept in economics that describes a situation in which two or more firms…
Q: 2. a. In an economy, the CPI went from 150 in 2014 to 130 in 2015. Did this economy have inflation…
A: Consumer Price Index refers to the change in prices paid by the individual or consumer for the goods…
Q: If supply is perfectly elastic, demand shifts have effect on market equilibrium quantity, and effect…
A: If the supply is perfectly elastic then aggregate supply curve is horizontal line parallel to the x…
Q: 3. Your boss has suggested that, instead of a savings of $37,000 annually, it makes more sense to…
A: The present worth of a cash flow refers to its value at present in accordance with its value in the…
Q: Why silicon valley bank shutdown?
A: Commercial bank Silicon Valley Bank had its main office in Santa Clara, California. With a 25.9%…
Q: Suppose that Eric believes that the government should aim to raise the welfare of the poorest people…
A: Behavioral economics studies how social, psychological, and emotional factors affect the economic…
Q: What is the required reserve ratio? 40% 25% 5% 10% Suppose that the Federal Reserve (the "Fed") buys…
A: Required reserves ratio The required reserve is a compulsory requirement from the central bank of…
Q: Karen has perfect complement preferences over toothbrushes B and toothpaste P, with the associated…
A: Perfect compliments goods are a type of goods that are always consumed together in fixed…
Q: Please help with these two: 1. Consider a Duopoly model, in which two firms decide a quantity…
A: Prisoner's dilemma: A situation in game theory where two individuals or groups can both benefit from…
Q: 3. Profit maximization using total cost and total revenue curves Suppose Jayden operates a…
A: Person Jayden's profit is maximized when he produces 1. 6 units of output, where Marginal Cost is 2.…
Q: Give typing answer with explanation and conclusion A country can produce 38 quail eggs and 62…
A: Opportunity cost refers to the loss which is incurred when next best alternative is given up. In…
Q: Use the following setting for questions 4-8. Consider the following static Prisoner's Dilemma game.…
A: The game theory explains the decision-making understanding of players in the market by observing the…
Q: The federal funds rate is the interest rate at which: prominent companies borrow from banks. banks…
A: The interest rate at which depository institutions (such as banks and credit unions) lend and borrow…
Q: Currently, the apple business is very competitive. However, suppose that the Koch Brothers buy up…
A: Monopolist: A monopolist is a single seller in the market and hence he faces the downward sloping…
Q: Steak is a normal good if: income and the demand for steak are negatively related. O the demand for…
A: A normal good is one for which, under the assumption that all other demand-affecting factors remain…
Q: You estimated a regression with the following output. Source | SS df…
A: A regression line is a straight line that represents the relationship between two variables in a…
Q: For the next 15 years, you will deposit $1,500 every month in a savings account. The account pays 6%…
A: An ordinary annuity is a series of equal payments made at the end of each period, such as the end of…
Q: (6) Which of the following statements best describes firm's cost-minimizing behaviors? a) A firm's…
A: In economics, the concept of cost minimization is based on the concept that firms aim to provide a…
Q: What are the Economic consequences of Russia and Ukraine war.
A: The affects or repercussions of a specific economic activity or event on different stakeholders,…
Q: See page 561 02 Question John and Daniel greatly enjoy each other's company but have different…
A: The pure strategy equilibrium is the set of strategies such that no single player have the incentive…
Q: Eric buys only milk and cookies. In year 1, Eric earns $90, milk costs $2 per quart, and cookies…
A: Budget constraints shows the relationship between the two goods, their prices and the income of…
Q: True or false question: Credit Card companies make the most money when you pay them back right away?
A: The bank or credit union that issues the credit card and extends the loan for the money used in a…
Q: Consider the odds and evens game introduced in Sec. 15.1 (Week 7, second video) and whose payoff…
A: The even and odd games are two-player zero-sum games in game theory. In these games, one player (the…
Q: Investment can be increased both by reducing taxes on private saving and by reducing the government…
A: When a government spends more money than it brings in over a given time frame, usually a fiscal…
Q: D $1.50 $1.25 $0.75 350 De In the above figure, assume that So represents the industry supply curve…
A: The correct Option is the second option that is:- An individual firm will face a horizontal demand…
Q: 4. Assume that Coca Cola and Pepsi are deciding on whether to invest in a new round of advertising.…
A: Dominant strategy is the strategy that yields higher payoff and the decision doesn't change with the…
Q: In our basic model of utility maximization, identify the graphical representations of the following…
A: Utility maximization refers to the process by which consumers make choices about how to allocate…
Q: A penurious graduate student has a food budget of $100.00/week. To survive with sufficient energy to…
A: The budget of the student is $100 per week. Protein requirement is 50 is units. Cost of hamburger…
Q: The profit maximizing output level for this firm is A. 0. B. 25. C. 40. D. 70. E. somewhere between…
A: Ans. Under competitive market The profit-maximization level for a firm is where P = MR = MC…
Q: Review the discussion of pitfalls in economic thinking in this chapter. Then identify the fallacy,…
A: A fallacy in economics is a flawed assumption or argument that is supported by insufficient data or…
Q: You estimated the following regression. What value would you predict for Y, if X = 46? (Round your…
A: Regression is a statistical method used in the domains of finance, investment, and other areas that…
Q: A government price floor would most likely Group of answer choices -lead to a surplus -I don't know.…
A: Demand curve is the downward sloping curve. Supply curve is the upward sloping curve. Equilibrium…
Q: Mona is saving money for college. Each week she doubles the amount of her deposit. If her first…
A: Amount deposit = $5 total deposit = 6
Q: What are the relationships between interest rate and country's economy? Do you support high or low…
A: The rate of interest refers to the amount that the lender charges over and above the principal…
Q: Consider a Duopoly model, in which two firms decide a quantity sequentially. For the convenience,…
A: Given that the market contains two firms in which firm 1 is a dominant firm and firm 2 is the…
Q: Suppose that there are two firms in the market. The market demand is given by P=220 - 2Q, where Q is…
A: Incase of monopoly , A firm will produce where the MR is equal to MC MR is the marginal revenue…
Q: The Demand and profit functions are the same as in the previous question (Question 2a): Demand:…
A: Profit is maximum where marginal profit is zero. The total revenue is the product of price and…
Q: Which of the following will not cause a change in aggregate demand? A. an increase in consumer…
A: In macroeconomics, AD or domestic final demand is the total demand for final products and services…
Q: 1. A customer puts his money in the amount of 1,500,000 into a bank deposit. If these deposits are…
A: ***Since the student has posted multiple questions, hence, the expert is required to solve only the…
Q: Which of the following will not cause a change in aggregate demand? A. an increase in consumer…
A: Aggregate demand as the name suggests is the demand of the whole economy as a whole.
Q: According to the simple monetary model, money is growing at 5% in the United States and 6% in the…
A: The foreign exchange market serves as a worldwide marketplace where currency exchange rates are…
Q: If the GDP deflator rose from 106.2 in 1998 to 112.3 in 2000, what was the rate of inflation?
A: Nominal GDP is the measure of GDP in current year price. Real GDP is the measure of GDP in base…
Q: 1. If domestic saving exceeds domestic investment, one would observe: (a) positive net capital…
A: Net capital outflow(NCO): The difference between the amount of domestic saving and the amount of…
Q: If the FC is $661 and the variable cost is $450 find the total cost.
A: Total cost means the sum of all the costs that take place for producing a particular amount of…
Q: A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to
A: Required reserve ratio: The required reserve ratio of a bank depicts the minimum amount of deposits…
Q: With a fully labeled supply-demand graph, draw the effects of a binding price FLOOR (minimum price)…
A: A price floor is a government-imposed minimum price (Pmin) that is set above the equilibrium price…
Your utility function is given by M1/2. You have $100 and are planning to invest in a venture where you can win or lose 50 with equal probability. Will you accept the venture? What is the minimum gain you need to make in the good scenario such that you will invest in the venture?
Step by step
Solved in 4 steps
- 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…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.Arielle is a risk-averse traveler who is planning a trip to Canada. She is planning on carrying $400 in her backpack. Walking the streets of Canada, however, can be dangerous and there is some chance that she will have her backpack stolen. If she is only carrying cash and her backpack is stolen, she will have no money ($0). The probability that her backpack is stolen is 1/5. Finally assume that her preferences over money can be represented by the utility function U(x)=(x)^0.5 Suppose that she has the option to buy traveler’s checks. If her backpack is stolen and she is carrying traveler’s checks then she can have those checks replaced at no cost. National Express charges a fee of $p per $1 traveler’s check. In other words, the price of a $1 traveler’s check is $(1+p). If the purchase of traveler’s checks is a fair bet, then we know that the purchase of traveler checks will not change her expected income. Show that if the purchase is a fair bet, then the price (1+p) = $1.25.
- Dr. Gambles has a utility function given as U(w)=In(w). Due to the pandemic affecting his consulting business, Dr Gambles faces the prospect of having his wealth reduced to £2 or £75,000 or £100,000 with probabilities of 0.15, 0.25, and 0.60, respectively. Suppose insurance is available that will protect his wealth from this risk. How much would he be willing to pay for such insurance?. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index . There is a 1 % probability that there is flooding damage at her house. The repair of the damage would cost £80,000 which would reduce the income to £10,000. a) Would Priyanka be willing to spend £500 to purchase an insurance policy that would fully insure her against this loss? Explain.Show that a decision maker who has a linear utilityfunction will rank two lotteries according to their expectedvalue.
- An investor with capital x can invest any amount between0 and x; if y is invested then y is eitherwon or lost, with respectiveprobabilities p and 1− p. If p > 1/2, how much should be invested byan investor having a exponential utility function u(x) = 1 − e −bx ,b > 0.. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index u(x) √x . There is a 1 % probability that there is flooding damage at her house. The repair of the damage would cost £80,000 which would reduce the income to £10,000. a) Would Priyanka be willing to spend £500 to purchase an insurance policy that would fully insure her against this loss? Explain.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.
- 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.how then can we find the total utility given q1=24, q2=30 and q3=15Calculate 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) ________