Max is thinking of starting a pinball palace near a large Melbourne university. His utility is given by u(W) = 1 - (5,000/W), where W is his wealth. Max's total wealth is $15,000. With probability p = 0.7 the palace will succeed and Max's wealth will grow from $15,000 to $x. With probability 1 - p the palace will be a failure and he’ll lose $10,000, so that his wealth will be just $5,000. What is the smallest value of x that would be sufficient to make Max want to invest in the pinball palace rather than have a wealth of $15,000 with certainty?
Q: A class uses weighted averages to calculate your course grade. Homework, quizzes, and discussions…
A: Marks in homework (H)= 85 Quiz marks (Q)=70 Marks in discussion (D)=75 Participation marks (P)= 100…
Q: Explain the effect of Covic-19 pandemic in PH in their economics. Like parks, malls, and other…
A: COVID-19 has had an impact on the Philippines' economy and economic outlook, from GDP to national…
Q: Using the Lucas Island model show that random shocks to the money supply will impact output while…
A: The Lucas Island Model refers to the model in economics that states the link between money supply…
Q: s to clear $40,000 after paying off the remaining mortgage principal (in other words, he will pay…
A: The rate of interest is 6% compounded monthly. Thus, Firstly, compute the effective interest rate.…
Q: f an insured purchases an Annuily from which income is received, the insured is the receiver…
A: Answer is given below
Q: Juanita makes $16 an hour at work. She has to take time off work to purchase her skirt, so each hour…
A: Answer is given below
Q: Compute the following: a. Current ratio. b. Working capital. c. Earnings per share.
A: Working capital, also known as net working capital (NWC), is the difference between a company's…
Q: If the government increases the excise tax on tires and the tax is added to the price, describe how…
A: Taxes refers to the quantity of cash paid through an individual to the authorities and classifies as…
Q: want you to provide me the Cash Flow diagram of the problem. Only cash flow diagram, the solution is…
A: A cash flow diagram is a monetary apparatus used to address the sources of income related with a…
Q: C = 100 + (1-t) Y t= 0.25 1=350-50i G=800 L = 0.25Y-62.5i M/P = 500 solve for: 1. IS equation
A: IS curve depicts the combination of interest rate and equilibrium output that clears the goods…
Q: Explain why the 2010 Obama Wall Street Reform Act was considered the most extensive overhaul of the…
A: When a financial crisis of unimaginable scale and intensity devastated the United States, millions…
Q: Which of the following is not a characteristic of a monopoly? Group of answer choices the seller has…
A: In general there are 4 main types of market structures which are as follows:- (1) Perfectly…
Q: Prices and wages help coordinate economic activities. Why?
A: Economic activity is how human beings purchase or promote items and offerings via the trade in…
Q: Please use microsoft excel
A: Net Saving = Saving - Operating Expenses Present Value = Future Value/(1+r)n where n is time period…
Q: Zhao Co. has fixed costs of $378,200. Its single product sells for $179 per units, and variable…
A: Variable prices change primarily based totally on the quantity of output produced. Variable prices…
Q: Discuss the utilitarian argument for conserving and preserving natural resources for future…
A: Individual animals may be used sustainably as long as evidence shows that their usage helps conserve…
Q: Consider two variable linear regression model: Y = a + Bx+u The following results are given below:…
A: Estimates of parameter are Alpha^ of Alpha Beta^ of beta.
Q: Consider the following categories of taxes: I. wealth tax II. consumption tax III. Direct tax…
A: Estate tax refers to the tax levied on the total property inherited due to the death of a person. In…
Q: (1) Which of the following is an example of what growth economics calls institutions? a. private…
A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: Guns (thousands of units) D043 ₁ Butter (thousands of units) Refer to Exhibit 2-2. If PPF2 is the…
A: As we merely know that the Production Possibility Frontier is denoted by the graphical…
Q: Let the slope of MR curve of a monopolist be -1/2. MC=5. After a tax at the rate t=5 per unit of…
A: Given The slope of the MR curve = -1/2 MC=5 Let the marginal curve is MR =a -0.5Q ... (1)
Q: Assume that a country is endowed with 35 units of oil reserve. (a) the marginal willingness to…
A: * SOLUTION :- Given that , Marginal willingness to pay = demand curve equation : P = 14 -…
Q: Q4. Evaluate to total present worth of all the cash-flow of machine XYZ for an interest rate of 10%…
A: Answer is given below
Q: Earth Movers & Shakers operates 3 iron ore mines. The accompanying table shows each mine's total…
A:
Q: How did the Bretton Woods Systems came into existence? Explain brie
A: The existence of the Bretton Woods System can be explained as follows:
Q: A depository institution holds $131 million in required reserves and $9 million in excess reserves.…
A: We have Required reserve RR = $131 million Excess reserve ER= $9 million Loans = $404 million…
Q: Suppose that in 1980, the U.S. inflation rate was 12.5 percent and the unemployment rate reached 7.4…
A: A target interest rate is a set of interest rates - such as the overnight lending rate, the repo…
Q: Has globalization facilitated or obstructed greater labor migration?
A: Globalization is defined as the process under which different countries of the world exchange goods,…
Q: correctly
A: The formula for terminal growth in FCF is FCF *(1+g)/(k-g) where FCF is the terminal years cash…
Q: Which of the following is a reason (s) that US investors should consider foreign markets when…
A: When an individual constructs a global portfolio, it tries to capture opportunities from different…
Q: Bob signs a note promising to pay Marie $ 4,875 in 8 years at 8 % compounded monthly. Then, 110 days…
A: Bank rate is the rate central bank charges to its domestic banks to borrow money , by changing the…
Q: Which of these is an example of a macroeconomic topic? Please choose the correct answer from the…
A: Microeconomics studies the behavior of individual economic units of the economy, i.e., individual…
Q: Question 11 Refer to your answers to Questions 8 Will there be entry, exit, or neither by other…
A: We have given Q Tc mc 0 6 1 10 4 2 15 5 3 21 6 4 29 8 5 38 9 6 48 10 The…
Q: Ellen is downloading labor market data for the most recent month , but her connection is slow and…
A: Unemployment Rate = 5% Participation rate = 62.5% Not In labour force = 60 mn
Q: Exercise A.5 A company operates with production function q=K¹/2¹/2 a) What type of returns to scale…
A: Returns to scale refers to the proportional increase in output as a consequence of increasing the…
Q: A) supply is inelastic and demand is elastic. B) supply is elastic and demand is elastic. C) supply…
A: Question 7 The answer is - D) Cannot arise on a market with perfect competition
Q: valuate the following statement: "When it comes to public goods, individuals do not reveal their…
A: 'Public goods' are goods and services that are available to everyone in a society.In nature, public…
Q: Question 10 An increase in demand in an industry prompts new firms to enter the market. When the…
A: An industry is a collection of businesses that are linked by their core business activity.There are…
Q: Illustrate the market demand curve for Pepsi Industry if the quantity demanded is lower when the…
A: Law of demand states that there is an inverse relationship between price and quantity demanded.
Q: I don't quite understand how you got 4% because when I did the math I kept get 1%
A: Given, Let's pretend you're betting $5 on a game. Chance of winning = 48% P(win) = 0.48 P(Lose) =…
Q: An industrial plant bought a generator set for P90,000. Other expenses including installation…
A:
Q: CLOI. Define economics and explain its importance to individuals' and firms' success.
A: NOTE: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: In not less than five sentences, explain ONE risk that a banking company is exposed to and how do…
A: Answer -
Q: Refer to Figure 3 in Question 29. The quantity of output at which the MC and ATC curves cross is the…
A: In industrial association, the minimum efficient scale (MES) or efficient scale of creation is the…
Q: Units of Total Average Marginal Labor Product Product Product 1 100 2 125 3 300 4 20 5 290 the table…
A: Law of Variable proportion shows that as we increase labour the production initially start to rise…
Q: Some oligopolies are characterized by cartels in which Group of answer choices members enter into…
A: Oligopoly is such a market condition where there are few firms which deal in homogeneous or…
Q: Homework (Ch 02) Suppose South Africa produces two types of goods: agricultural and capital. The…
A: Production possibilities frontier shows the combinations of two goods that can be produced with the…
Q: Draw the initial equilibrium for the domestic economy in the IS-LM-IP diagram. Then, draw the new…
A: Answer -
Q: Elaborate what is catering function for.
A: Function catering is the provision of a particular function for a certain set of people at a defined…
Q: Question 14 Questions 14-18 refer to Figure 5-1 below. Suppose a firm operating in a perfectly…
A: Here, the given graph shows the cost functions of a perfectly competitive market with current price…
Max is thinking of starting a pinball palace near a large Melbourne university. His utility is given by u(W) = 1 - (5,000/W), where W is his wealth. Max's total wealth is $15,000. With probability p = 0.7 the palace will succeed and Max's wealth will grow from $15,000 to $x. With probability 1 - p the palace will be a failure and he’ll lose $10,000, so that his wealth will be just $5,000.
What is the smallest value of x that would be sufficient to make Max want to invest in the pinball palace rather than have a wealth of $15,000 with certainty?
(Please round your final answer to the whole dollar, if necessary)
Step by step
Solved in 2 steps
- Max Pentridge is thinking of starting a pinball palace near a large Melbourne university. His utility is given by u(W) = 1 - (5,000/W), where W is his wealth. Max's total wealth is $10,000. With probability p = 0.9 the palace will succeed and Max's wealth will grow from $10,000 to $x. With probability 1 - p the palace will be a failure and he’ll lose $5,000, so that his wealth will be just $5,000. What is the smallest value of x that would be sufficient to make Max want to invest in the pinball palace rather than have a wealth of $10,000 with certainty? ____ (Please round your final answer to the whole dollar, if necessary)Amy likes to go fast in her new Mustang GT. Their utility function over wealth is v(w) where w is wealth. If Amy goes fast she gets an increase in utility equal to F. But when Amy drives fast, she is more likely to crash: when she drives fast the probability of a crash is 10%, but when she obeys the speed limit, the probability of a crash is only 5%. Amy's car is worth $2000 unless she crashes, in which case it is worth $0. If Amy doesn't have insurance, driving fast isn't worth the risk, so she will alway obey the speed limit. If Amy is offered an insurance contract with full insurance for a premium P with the deductible D, which of the inequalites below is her incentive compatibility constraint that makes sure that she will still obey the speed limit even when she is fully insured? 0.05U(2000 – P – D) + 0.95U(2000 – P) > 0.05U(0 – P – D + 2000) + 0.95U(2000 – P) 0.05U(2000 – P – D) + 0.95U(2000 – P) > 0.1(U(2000 – P – D) + F) + 0.90(U(2000 – P) + F) 0.05U(2000 – P – D) + 0.95U(2000)…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). 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.
- AsapJacob is considering buying hurricane insurance. Currently, without insurance, he has a wealth of $80,000. A hurricane ripping through his home will reduce his wealth by $60,000. The chance of this happening is 1%. An insurance company will offer to compensate Jacob for 80% of the damage that any tornado imposes, provided he pays a premium. Jacob’s utility function for wealth is given by U(w) = In (w). (A) What is the maximum amount Jacob is willing to pay for this insurance? Show work and explain.To go from Location 1 to Location 2, you can either take a car or take transit. Your utility function is: U= -1Xminutes -5Xdollars +0.13Xcar (i.e. 0.13 is the car constant) Car= 15 minutes and $8 Transit= 40 minutes and $4 What is your probability of taking transit given the conditions above? What is your probability of taking transit if the number of buses on the route were doubled, meaning the headways are halved? Remember to include units.
- 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.John is a farmer with $225 of wealth. He can either plant corn or beans. If he plants corn, John earns an income of $675 if the weather is GOOD and $0 if the weather is BAD. If he plants beans, John earns an income of $451 under both GOOD and BAD weather. The probability of GOOD weather is 0.7. The probability of BAD weather is 0.3. John's utility function is u(C) = 5VC , where C is the value of consumption. Use this information to fill out the table below. (Don't forget to include the value of wealth when you compute consumption!). The PDF will round all typed numbers to two decimals; However, you should use all decimals when computing your answers. %3D Plant Corn Plant Beans Expected value of consumption Expected value of utility Certainty Equivalent Risk Premium 9. What type of risk preferences does John have? Mae owns an insurance company in a nearby town and has decided to offer conventional crop insurance to corn farmers in the area. Assume that Mae has perfect information and…John is a farmer with $225 of wealth. He can either plant corn or beans. If he plants corn, John earns an income of $675 if the weather is GOOD and $0 if the weather is BAD. If he plants beans, John earns an income of $451 under both GOOD and BAD weather. The probability of GOOD weather is 0.7. The probability of BAD weather is 0.3. John’s utility function is U(c) = 5√c , where c is the value of consumption. Mae owns an insurance company in a nearby town and has decided to offer conventional crop insurance to corn farmers in the area. Assume that Mae has perfect information and can write and enforce an insurance contract that requires the farmer to plant corn. Here’s how the insurance contract works. At the beginning of the year, the corn farmer pays an insurance premium of $202.5. If the weather is GOOD, Mae makes no payment to the farmer. If the weather is BAD, Mae makes an indemnity payment of $675 to the farmer. a. If a farmer buys this insurance contract,what is Mae’s expected…
- Joe's wealth is $100 and he maximizes his expected utility. Joe’s utility as a function of his wealth is U(W) = W1/2. Joe might oversleep his economics exam. He figures there is only a 1 in 10 5 chance that he will, but if he does, it will cost him $100 in fees to the University to take an exam later. Joe's neighbor, Mary, never oversleeps. She offers to wake Joe one hour before the test, but he must pay her for this service. What is the most that Joe would be willing to pay for this wake-up service? a. $10 b. $9 c. $19 d. $100 e. $12.7A pirate is about to set sail on a 2-period journey (trip). He has 100 bags of barley (food). He must decide how much to consume in period 1 and how much to consume in period 2: (C1, c2). He gets all the barley in period 1 and none in period 2. Unfortunately, rats will eat 50% of any barley that he saves to consume in period 2. If the pirate's utility function is U(C1, C2) = C1C2, what levels of consumption does he choose in each period? (Hint: The "price" of barley in each period can be assumed to be 1.)Consider a person with the following utility function over wealth: u(w) = ew, where e is the exponential function (approximately equal to 2.7183) and w = wealth in hundreds of thousands of dollars. Suppose that this person has a 40% chance of wealth of $100,000 and a 60% chance of wealth of $2,000,000 as summarized by P(0.40, $100,000, $2,000,000). a. What is the expected value of wealth? b. Construct a graph of this utility function . c. Is this person risk averse, risk neutral, or a risk seeker? d. What is this person’s certainty equivalent for the prospect?