Consider two uncertain outcomes W₁ and W₂, each of which has a 50% probability of occurring. The household's expected utility function is given as: U(M)=10W-W². If W₁=2 and W2=4, what are the expected utility of wealth and the utility associated with the expected wealth? O The expected utility of wealth is 20, while the utility associated with the expected wealth is 21. The expected utility of wealth is 21, while the utility associated with the expected wealth is 20. O The expected utility of wealth is 24, while the utility associated with the expected wealth is 16. O The expected utility of wealth is 16, while the utility associated with the expected wealth is 24. O Both the expected utility of wealth and the utility associated with the expected wealth are 24. O No answer.
Q: An analyst for Food Max estimates that the demand for its "Brand X" potato chips is given by:…
A: Given:The demand function for Brand X will be:FoodMax sold = 6 million bags last year for Brand X…
Q: sider the diagram below showing a consumer's choice of goods (Trainers and Electricity), following a…
A: When the price of a good change then its demand also changes and we call it price effect. This price…
Q: 5. Equilibrium rate of exchange Aa Aa Suppose that, initially, the foreign exchange market between…
A: The exchange rate at which the quantity of a currency provided and requested is equal is known as…
Q: In the figure at right, at which output level is this firm earning negative economic profits? OA. 12…
A: Profit can be understood as the amount of balance left after meeting all sorts of expenses. It helps…
Q: Show that if the economy's aggregate supply curve is vertical, fluctuations in the growth of…
A: This can be defined as a concept that shows the total demand for the products and services in a…
Q: Because this country exports steel, the world price is represented by Suppose that a "pro-trade"…
A: Consumer surplus measure of the benefit consumer receive when they pay a price for a good or service…
Q: х 0 150 $1500 $625 $2800 $865 Price of Calculators $27 12 7 2 300 400 Domestic Supply Domestic…
A: The demand curve is the downward-sloping curve. The supply curve is the upward-sloping curve.The…
Q: Florida has decided to eliminate occupational licensing requirements for lawyers, so you don't have…
A: Demand refers to the quantity of goods or services that a consumer is willing and able to buy at a…
Q: Question: In order to manipulate the inflation rate in the United States, the Federal Reserve raises…
A: Federal funds rate is the interest rate that banks charge each other for overnight loans. When the…
Q: In the figure at right, at which output level is this firm earning negative economic profits? OA. 12…
A: Profit refers to the financial gain earned by a business or an individual after all expenses and…
Q: A bank has excess reserves of $8,000 and demand deposits of $80,000; the reserve requirement is 20%.…
A: The reserve are the part of deposit that is kept aside by the banks as per the rules of central…
Q: You are a manager in charge of monitoring cash flow at a major publisher. Paper books comprise 40…
A: The cross elasticity of demand is a financial idea that actions the responsiveness in the amount…
Q: Suppose when L=50 and K=100, output Y=$1,000. How much will Ynew be if this company triples both…
A: Given initial values:-L=50K=100Y=$1000Company triples production and hence…
Q: Advocates for globalization believe that globalization promotes? Multiple Choice Environmental…
A: Globalization refers to the process of interaction and integration among people, companies, and…
Q: Which of the following will not cause a shift in the demand curve for new houses?…
A: Demand refers to the quantity of goods or services that a consumer is willing and be able to buy at…
Q: Figure 8-7 Price $22 20- 18- 16 14 12 10. 8 6- 4- 2 0 -Tax- 5 10 15 20 25 30 35 40 45 50 D .a. $4 X…
A: Tax is an amount paid by sellers to government.Tax is an important tool for government to control…
Q: The following table shows the daily cost data and demand schedule for a typical firm producing board…
A: Monopolistic competition is a form of imperfect competition where, many firms in the market produce…
Q: Price and cost (dollars) 70 60 50 40 30 20 10 0 MC₁ 50 Quantity MC₂ 100 Demand 150 The demand for…
A: The marginal cost is the change in the total cost that arises when the quantity produced is…
Q: The value of the Russian Ruble changed from 94 to the dollar to 91 to the dollar. What is the likely…
A: The foreign exchange market, frequently shortened as the Forex or FX market, is a worldwide…
Q: = Firm A has cost function c(q, r, w). At output q = 4 total cost is c(4, r, q) = 60, and at output…
A: It can be defined as a concept that shows the amount of expenditure and any other sacrifice such as…
Q: Read the following statement and answer questions 17 and 18:Oil prices are on track to reach $100 a…
A: The question is asking about the type of inflation that could occur in South Africa due to the…
Q: Refer to Figure 8-1. When the market is in equilibrium, what area represents producer surplus? a.…
A: International trade:International trade means buying and selling of goods and services from outside…
Q: A group of refugees from Syria just moved to the U.S. and are looking for office desk jobs. They are…
A: Unemployment is a situation where the people who want a job but are not getting the same.This means…
Q: Assume that health insurance is private in a country, and the market for insurance is competitive.…
A: The market equilibrium quantity is where the private marginal benefit curve intersects the private…
Q: Many financial analysts and economists eagerly await the press releases for the reports on the home…
A: Economic Metric like unemployment and jobless claims are carefully examined, but it's important to…
Q: Define capital stock. Use the aggregate demand and supply to show the effects of a decrease in…
A: Capital stock refers to the total measure of physical assets or resources accessible inside a firm…
Q: (a) Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. What…
A: Complementary goods are goods that are consumed together. When the price of one complementary good…
Q: d) What is level of output corresponding to the minimum level of Ron's average variable cost curve?…
A: The short-run total cost of Ron's window washing services: The market for window washing services is…
Q: Assume that Canada and Kenya are trading partners. a.lf the real interest rate in Canada decreases,…
A: International trade means the exchange of products and services between countries. It occurs when a…
Q: Based on the information in the table, calculate GDP. Write the exact answer. Do not round.…
A: Gross Domestic Product: The total market value of all final goods and services produced within a…
Q: Consider the perfectly competitive market for peaches, with identical firms and the usual shaped…
A: A perfectly competitive market is a market structure where numerous firms sell identical products…
Q: If price is $25 when the price elasticity of demand is -2, then marginal revenue must be: O $25.…
A: Given:-Price=$25Elasticity of demand(Ed)=-2To calculate:-Marginal Revenue=?
Q: What is the fixed cost, when output is 1, total cost is 7, total revenue is 10, average revenue is…
A: Cost:Cost is defined as the expenditure. It is expressed in terms of money value in the production…
Q: A monopoly produces a good with a network externality at a constant marginal and average cost of c=…
A: This problem mathematically need to determine the profit-maximizing strategy for a monopoly over two…
Q: A baseball team plays in a stadium that holds 52,000 spectators. With ticket prices at $10, the…
A: Linear demand function:Linear demand function describes how a value p, in a given case it is price,…
Q: Which of the following is a predicted result of the increased use of additive manufacturing (using…
A: Additive manufacturing or 3D printing reduces the fixed costs associated with traditional…
Q: The table shows an economy's total production and the prices of the final goods it produced in 2020…
A: GDP is the gross domestic product. GDP is defined as the market value of all the final goods and…
Q: Calculate total costs at 4 units of output. Do not put a dollar sign in your answer. (The 6…
A: Disclaimer- “Since you have asked multiple questions, we will solve the first three questions for…
Q: “In 2022, India’s GDP was $3,386.4 billion whereas its GNP was $3,370.15 billion”. The reason for…
A: The objective of the question is to understand the difference between Gross Domestic Product (GDP)…
Q: The Wilsons have a combined annual gross household income of $113,000, and they wish to purchase a…
A: Down payment is an initial payment made when something is bought on credit. The purpose of down…
Q: $500 grows to $1,500 over a certain period and interest rate, what will be the present value of…
A: Present value represents the current worth of a sum of money that is to be received or paid in the…
Q: Oil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging…
A: The objective of the question is to understand the potential impact of inflation, caused by rising…
Q: An investor is considering two possible investment alternatives, Portfolio A and Portfolio B. The…
A: Utility function of investorThis function represents the investor's level of satisfaction or utility…
Q: Which of the following statements is false? O The Marshallian demand curve will only slope downwards…
A: A Giffen good is a type of inferior good for which the quantity demanded increases as its price…
Q: Which of the following would be included in Canadian GDP for a given year? The market value of: A.…
A: Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and…
Q: 8 of 15 Izzy who consumes only grilled chicken sandwiches and salads with low-fat dressing, has a…
A: The objective of the question is to determine whether Izzy is making the utility-maximising choice…
Q: Entrepreneurs absorb the risk of starting and running a company. Is Kennedy right about allowing…
A: Wages set by labour will consider only the individual preference than considering the welfare of…
Q: When will the deadweight loss be created? When a binding price constraint is implemented…
A: Deadweight loss, in economics, refers to the loss of economic efficiency that happens when the…
Q: 6. Characteristics of oligopoly An oligopolistic market structure is distinguished by several…
A: Oligopoly refers to a market structure characterized by a small number of large firms or businesses…
Q: A new drug is invented that increases both the marginal benefit of investing in health (at all…
A: The production possibility curve (PPC), also known as the production possibility frontier (PPF), is…
Step by step
Solved in 5 steps with 4 images
- Your utility function is U = w, where W is your wealth. Your current wealth is $800. There is a 25% chance that you will suffer a loss of $600. You are: O Risk Averse O Risk seeking O Risk neutral O Risk encumberedJohnny is "paid" by his parents $2o if he gets a grade A, $10 if he gets a grade B, whereas he has to pay his parents back $5 if he gets a grade other than A or B. On average 20% of the grades he gets are A, and 30% are grades B. What is the expected value of what he "earns" per grade ? What is the expected value of what he "earns" at school weekly if on average he gets five grades a week ? How long should Jim save until he collects enough money to buy a pair of brand new Hi-Fi headphones that cost $225?Hello can any one help with this Economics question: A contractor spends Dollar 3,000 to prepare for a bid on a construction project which, after deducting manufacturing expenses and the cost of bidding, will yield a profit of dollar 25,000 if the bid is won. If the chance of winning the bid is ten per cent, compute his expected profit and state the likely decision on whether to bid or not to bid?
- Q1. A farmer believes there is a 50-50 chance that the next growing season will be abnormally rainy. His expected utility function has the form Expected utility = 0.5lnYNR + 0.5lnYR Where and represent the farmers income in the state of ‘normal rain’ and ‘rainy’ respectively. Suppose the farmer must choose between two crops that promise the following income prospects Crop YNR YR Wheat $83,000 $10,000 Maize $83,000 $15000 What mix of wheat and maize would provide maximum expected utility to this farmer?A risk-averse expected-utility maximizer has initial wealth w0 and utility function u. She facesa risk of a financial loss of L dollars, which occurs with probability π. An insurance companyoffers to sell a policy that costs p dollars per dollar of coverage (per dollar paid back in theevent of a loss). Denote by x the number of dollars of coverage.(a) Give the formula for her expected utility V (x) as a function of x.(b) Suppose that u(z) = −e−zλ, π = 1/4, L = 100 and p = 1/3. Write V (x)using these values. There should be three variables, x, λ and w. Find the optimal value of x,as a function of λ and w, by solving the first-order condition (set the derivative of the expectedutility with respect to x equal to zero). (The second-order condition for this problem holds butyou do not need to check it.) Does the optimal amount of coverage increase or decrease in λ,where λ > 0?(c) Repeat exercise (b), but with p = 1/6.(d) You should find that for either (b) or (c), the optimal coverage…Please explain in detail about expected utility to get a positive upvote. An individual has a utility function U = W¼, where W is her total wealth. She has one safe asset worth Rs 5,000, and another risky asset whose value can be either Rs 5,000 or Rs 1,400 with equal probabilities. What is her expected utility? (a) Rs 11,400 (b) Rs 100 aw lo boeoqmoo vmonoos to on g cubire cou s o iva alagos ad a adWnooni lanou lo OAuti (c) Rs 2,580 (d) Rs 90
- a. Suppose that you took part in a lottery that has a chance to increase, decrease or have no effect on your level of income. With probability 0.5, your income remains at it original level K500; with 0.2 probability, your income increases to K700; and with probability 0.3, your income decreases to K400. The utility function is.u(1) =I^0.7where I denote income leveli.Using the utility function show that the consumer's risk preference is averse. (2marks)ii.Calculate both the EU and EV of the income. (4marks)iii.Using the results in (il) above, indicate the attitude to risk of this consumer. (2marks)Questions 18 through 20 refer to the following information: Shawn's consumption is subject to risk. With probability 0.75 he will enjoy 10000 in consumption, but with probability 0.25 he will have only 3600. His utility function for consumption is given by v(c) = vc. Question 18 What is the expected value of Shawn's consumption? Question 19 What is his expected utility?1. 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 o if it does not. Assume that the Bernoulli utility function takes the form u(x) = -e-rx with r>0. How much should she wager? Does her utility function exhibit CARA, DARA, IARA?
- Consider a risk-neutral agent who maximizes expected utility of wealth facing a lottery with a "bad" (wealth remains the same) and a "good" (wealth increases by a small amount) outcome (both with non-zero probabilities). For this agent, O the certainty equivalent will be zero, but the risk premium will be greater than zero. O the certainty equivalent will be greater than zero, but the risk premium will be zero. O the certainty equivalent will be greater than zero, but the risk premium will be less than zero. O the certainty equivalent will be less than zero, but the risk premium will be greater than zero. O the certainty equivalent and the risk premium will both be zero. there is not enough information to make statements about the certainty equivalent and the risk premium.10. Karl's utility function is U(w) = 20 is w. = 300. He considers a gamble in which he could win 200 with probability p or lose 200 with probability 1 described by expected utility theory. He is indifferent between keeping his initial wealth for sure or taking the gamble if the value of p is where w is wealth. His initial wealth %3D w+200 - p. Karl's preferences in the face of risk are (a). 4 (b) .5 (c) .6 (d) .7 (e) .8A person has wealth of $500,000. In case of a flood her wealth will be reduced to $50,000. The probability of flooding is 1/10. The person can buy flood insurance at a cost of $0.10 for each $1 worth of coverage. Suppose that the satisfaction she derives from c dollars of wealth (or consumption) is given by u(c) = √c. Let CF denote the contingent commodity dollars if there is a flood (horizontal axis) and CNF denote the contingent commodity dollars if there is no flood (vertical axis). (a) Determine the contingent consumption plan if she does not buy insurance. (b) Determine the contingent consumption plan if she buys insurance $K. (c) Use your answer in (b) to eliminate K and construct the budget constraint (BC) that gives the feasible contingent consumption plans for different amounts of insurance K. Determine the slope of budget line (both graphically and by forming the price ratio).