Villagers each have $1,200 to invest in either cattle or a government bond. They will sell either at the end of the year. The bond earns 5% interest and the cattle price depends on the number of animals sold. Using the table below, the individual optimum choosing cattle is and the social optimum is # Cattle 1 2 3 4 5 1:4 3; 1 4; 3 5:2 Total Cattle Average income Income $1,400 $2,750 $4,050 $5,300 $5,850 Marginal Income
Villagers each have $1,200 to invest in either cattle or a government bond. They will sell either at the end of the year. The bond earns 5% interest and the cattle price depends on the number of animals sold. Using the table below, the individual optimum choosing cattle is and the social optimum is # Cattle 1 2 3 4 5 1:4 3; 1 4; 3 5:2 Total Cattle Average income Income $1,400 $2,750 $4,050 $5,300 $5,850 Marginal Income
Chapter7: Uncertainty
Section: Chapter Questions
Problem 7.8P
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Villagers each have $1,200 to invest in either cattle or a government bond.
They will sell either at the end of the year. The bond earns 5% interest and
the cattle price depends on the number of animals sold. Using the table
below, the individual optimum choosing cattle is
and the social
optimum is
# Cattle
1
2
3
4
5
1; 4
3; 1
4; 3
5; 2
Total Cattle Average
lincome
Income
$1,400
$2,750
$4,050
$5,300
$5,850
Marginal
Income
11
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