Consider the insurance problem from class in which an agent with wealth w dollars faces a probability € (0,1) of incurring a loss of dollars, where 0 < l< w. He can purchase insurance at a price q € (0, 1) per unit that pays 1 dollar per unit purchased if the loss occurs. Suppose the agent is an expected utility maximizer with von Neumann-Morgenstern utility u(x) = ln(x + 1). You may assume throughout this question that the parameters are such that the Ai b. Jution nel antilid stomi
Q: As observed in a certain appliance store when the price of electric fan increased from 1000 to 1200…
A: Cross-price elasticity measures the responsiveness of change in demand of one good to change in the…
Q: NDMA WISHES TO PROVIDE P40,000.00 TO YOUR YOUNGEST BROTHER ON HIS 21st BIRTHDAY. HOW MUCH SHOULD SHE…
A: FV = 40,000 r = 6% yearly i.e. 3% monthly n = 35.5 months
Q: Armando consumes two goods: grapes and wine. He can purchase both at the market and also possesses a…
A: The Alfred Marshall-named Marshallian demand function defines how much a consumer needs of a certain…
Q: f the interest rate is 10%, the present value of $100 to be paid next year is
A: Present Value is the stream of future income which is discounted. The present value of money is…
Q: The ________ function is the mathematical representation of the technological relationship between…
A: Net export is the difference between Export and import. Saving is the remaining amount from the…
Q: Price of Gardening ($) L M O P S U Q N MPB MC MSB Quantity of Gardening a) Using the letters on the…
A: The given scenario is of positive externality. Positive externality refers to positive spillover…
Q: Engr. Lalai borrowed money from a bank. She received an amount of P2,215 and agreed P 2,350 to pay…
A: present value is the value of investment / cashflow in today's dollar. Future value is the value…
Q: Consider an individual with preferences over two goods. This consumer is maximising utility when:…
A: The problem of estimating consumer equilibrium, that is, the combination of products and services…
Q: Consider a weather forecaster who is paid based on her performance. Each day, she forecasts the…
A: The act of forecasting requires coming up with forecasts that are based on both past and present…
Q: The Canadian government provides subsidies to diaper manufacturers to produce biodegradable diapers…
A: Subsidy is the term used to describe government assistance or incentives given to producers to…
Q: The rate at which a consumer is able to substitute one good for another is determined by the…
A: In economics, the marginal rate of substitution (MRS) refers to a rate at which a consumer will be…
Q: what is The rule of assumptions in building economics models?
A: Assumptions refer to the things that economic assume to be true even without any proof. For example…
Q: Output/Income Consumption Savings MPC MPS APC APS 0 80 0-80 = -80 - - - - 100 140
A: Given data, Output/Income Consumption Savings MPC MPS APC APS 0 80 0-80 = -80 - - - - 100 140…
Q: Explicit Costs = Worker wages + pets and supplies to sell + annual rent Explicit Costs = 92,000 =…
A: In perfect competition, in long run there is zero economic profit. Same is the case with the…
Q: Bob le Flambeur is offered a raffle ticket. With probability p, the raffle ticket wins, and pays 5…
A: (a) Buying a raffle ticket with probability p, after winning he gains the amount = Winning amount -…
Q: Suppose that country A produces two goods (a labor-intensive good X, furniture, and a…
A: Labor intensive implies a procedure or industry that needs a large amount of labor to produce its…
Q: The working hours method of depreciation assumes that the reduction of asset's value is proportional…
A: Depreciation refers to the term that is used to describe how physical things lose value as time and…
Q: The following table provides information on the price, quantity, and average cost for a monopoly. At…
A: In economics, profit maximization is the short run or long run process by which a firm may determine…
Q: Which of the following policies should the government NOT adopt if its goal is to enhance economic…
A: When talking about economic growth, it can be said that it is explained by an increase in the…
Q: For the last question, can you explain why the answer states grain and not cars? was this an error?
A: Introduction: Opportunity cost refers to the second-best alternative that has been forgone. This…
Q: oly Suppose the following are true for a monopolist market: P = 450-16Q MR = 450-32Q Q* = MC = 55…
A: Given, P = 450 - 16Q MR = 450 - 32Q MC = 55 + 37 ATC = 55+ 18.5Q
Q: Answer the question using the 3 -step approach 2. Due to Covid 19, there has been a major delay…
A: Change in demand and supply occurs due to change in factors other than price. Increase in demand and…
Q: *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint…
A: It is given that: M2 = $21,711.40 billion Money market funds = $1096.30 billion Small time deposits…
Q: A firm is currently buying 30 TV ads at $200 each and 20 newspaper ads at $100 each for a total…
A: Advertising costs covers expenses associated with promoting an industry, entity, brand, product, or…
Q: e table shows the average income of households and the quantity demanded of products M and N at…
A: Solutions for sub-parts a, b and d: Price elasticity of demand measures the responsiveness in…
Q: 5. The equation R(x) = -5x² + 15x + 20 models the revenue (profit - costs) of a company in hundreds…
A: Revenue function: R(x) = -5x2 + 15x + 20 x = Quantity sold in thousands units
Q: Consider a weather forecaster who is paid based on her performance. Each day, she forecasts the…
A: Probability of Rain = p Probability of no rain = (1 - p ) Expected Value = Value *Probability…
Q: magine a consumer - worker who has a total time endowment of T = 100 hours er week. He/She can use…
A: Utility is maximized by distributing the hours between the leisure and work. Wage affects the labor…
Q: 3. Explain in detail and without the aid of graph how an economy starting at a level of capital per…
A: Steady state level of capital per capita is the level of capital per capita where the capital per…
Q: 2. Using the data in Problem no. 1, construct an amortization schedule showing the principal at the…
A: As you mention above we are just solving part 2
Q: Describe the forces that drive family formation according to the neoclassical/Becker model of family…
A: Family Formation is defined as a process in which relationships are created between an individual…
Q: Spring is here, and Shen and his brother would like to go. fishing for the weekend in New Hampshire.…
A: Private goods are rival in consumption and excludable whereas public goods are non rival as well as…
Q: Turbines, aerospace products, optical equipment, and measuring instruments, are examples of products…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Question Compare the functions of the Federal Reserve district banks with those for the Board of…
A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…
Q: minimum average total cost is $15 at a quantity of 200 hamburgers. His total fixed cost is $300. Use…
A: Given information: AVC at 100 hamburgers is $10, and AVC is the minimum at this point. ATC at 200…
Q: Q* = How much profit did the monopolist earn? Profit = $
A: In economics, profit maximization is the short run or long run process by which a firm may determine…
Q: Purchase price = 500,000, installation fee = 10,000, tax = 10% of purchase price and installation…
A: What is Depreciation? Depreciation is the assessment of the decline in the value of an asset due to…
Q: 0
A:
Q: What is meant by produce outside ppf and produce inside ppf
A: A graph that shows various combinations of two possibly producible things is known as a production…
Q: Refer to Figure 17.1. Economic growth is represented by Group of answer choices a movement from…
A: The goal of economic growth is to increase national income while utilising resources sustainably. It…
Q: A constant depreciation based on the assumption that the lost in value is proportional to the age of…
A: The sum-of-year digit method of depreciation is the accelerated depreciation method in which the…
Q: Imagine a consumer - worker who has a total time endowment of T=100 hours per week. He/She can use…
A: Utility Maximization depends on the distribution of available hours between the work and leisure.…
Q: The populations of Abu Dhabi (National, Non-National, and Total) and UAE are shown in the following…
A: Here we are given the population data of Abu Dhabi & UAE and we will use this data to calculate…
Q: Suppose that the supply and demand schedules for a product are as follows: Price Quantity demanded…
A: The government imposes price limits to protect consumers' interests in the marketplace. These…
Q: Excel template Break-Even to determine the best decision. Round your answer for the breakeven…
A: In order to calculate the point at which you will break even, a break-even analysis compares the…
Q: (a) Carefully sketch the budget set. Be sure to identify relevant points of intersection with the…
A: Answer is given below
Q: Nash equilibrium is that both firms charge the price c.
A: The profit for Firm i =a-pipi-c if pi<pj= 0 if…
Q: mer of two goods has utility U(X1, 2) = X1X2. She can purchase each good ce of p; dollars per unit.…
A: Introduction A person who uses two products has usefulness. She can pay a fixed charge of C…
Q: and hence so the substitution effect is h₁ (p, u) = = Ә др1 -e(p, u) Əh₁ 3 дрг 4 = = 3 2 2 = 4 V 3³…
A: The total price effect is equal to the substitution effect minus the income effect. Here we used the…
Q: Armando consumes two goods: grapes and wine. He can purchase both at the market and also possesses a…
A: The Alfred Marshall-named Marshallian demand function defines how much a consumer needs of a certain…
please only do: if you can teach explain steps of how to solve each part: b
what is the optimization to use for foc?
please solve for x
also the other part
Step by step
Solved in 2 steps
- . 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.. 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.. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index u(x) = square root 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. b) What would be the highest price (premium) that she would be willing to pay for an insurance policy that fully insures her against the flooding damage?
- Microeconomics Wilfred’s expected utility function is px1^0.5+(1−p)x2^0.5, where p is the probability that he consumes x1 and 1 - p is the probability that he consumes x2. Wilfred is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2500 with probability p = 0.4 and $3700 with probability 1 - p. Wilfred will choose the sure payment if Z > CE and the lottery if Z < CE, where the value of CE is equal to ___ (please round your final answer to two decimal places if necessary)A risk averse agent, a risk neutral agent, and a risk loving agent each face the risky situation ($684, $193; 1-0.45, 0.45). Suppose the general form of each agent's utility function is U($X) - a ($X - $Min)^b where a is a strictly positive individual-specific-parameter and where b 0.5 for the risk averse agent and b= 2 for the risk loving agent. What is the combined total sum of the three agents' U(EV)? Please compute and state your answer up to two decimal placesSuppose that consumers have utility function U(C) = log(C) where C is the consumption level and log is the natural logarithm. Consumers have initial consumptionlevels of 100 and are exposed to the following risk of loss: lose 10 with probability0.4 and lose 5 with probability 0.6. They are considering buying insurance to coverthese losses. What is the fair price for the insurance?
- Let U(x)= x^(beta/2) denote an agent's utility function, where Beta > 0 is a parameter that defines the agent's attitude towards risk. Consider a gamble that pays a prize X = 10 with probability 0.2, a price X = 50 with probability 0.4 and a price X = 100 with probability 0.4. Compute the agentís expected utility for such gamble and find the value of Beta such that the agentis risk neutral? Suppose B= 1, what is the certainty equivalent of the gamble described above? What is the Arrow-Pratt measure of absolute risk aversion?Zac has a current wealth of £400. He gets an email offering him the chance to enter a prize draw that gives £500 prize with a 25% chance and £0 the rest of the time. Zac is an expected utility maximiser with a von Neumann-Morgenstern utility in wealth w of u (w) = Vw. What is the minimum price at which Zac will sell his rights to enter the draw? £106.25 £506.25 O E31.25 £22.5 £56.25Gary 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). 1. Taking the bet would reduce his expected utility. 2. Taking the bet would leave his expected utility unchanged. 3. Taking the bet would increase his expected utility. 4. There is not enough information to determine whether taking the bet would increase or decrease his expected utility. 5. The information given in the problem is self-contradictory.
- 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.Question 5 Suppose that there is a 10% chance Ja'Marr is sick and earns $10,000, and a 90% chance he is healthy and will earn $70,000. Suppose further that his utility function is the following (utility = square root of income) U (I) = VIncome Ja'Marr's utility from expected income is , and his expected utility of his income is 264.58; 100 248.12; 252.98 100; 265.58 252.98; 248.12Dr. 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?