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The kingdom of Arendelle has equal numbers of two types of workers, domestic servants and ice sellers, which both earn $1,000 per week. All workers face a risk of being laid off next year due to bad market conditions, in which case they will have an income of only $250/week from an alternative part-time job. Domestic servants have a 10% probability of being laid off, and ice sellers have a 30% probability. All have the same utility function: U = ln(C).
a. Suppose that workers would like to insure against being laid off. If insurers can offer different insurance contracts to each type of worker, what will be the actuarially fair premiums for full insurance for each group? (Assume that full insurance pays a benefit of $1000 per week, so that part time work is not necessary.)
b. Explain why a private market for unemployment insurance is unlikely to exist.
A no production economy has 2 consumers (A and B) who each consume two different goods (x and y). Person A is endowed with (120,270) and has a utility function Ua(Xa,Ya)=X^(2/3)Y^(1/3) . Person B is endowed with (480,180) and has a utility function U..
Yet many financial decision-makers at some of the most prominent firms in the world continue to use less desirable measures such as the payback.
A firm has the production function f(x, y) = x^0.90y^0.80. This firm has
Acme Steel Co. produces 1000 tons of steel. Steel sells for $30 per ton. Acme pays wages of $10,000. Acme buys $15,000 worth of coal, which is needed to produce the steel. Acme pays $2,000 in taxes. What is Acme's contribution to GDP? What are Acme's..
The inverse demand for a product is P(Q) = 100 − (1/2)Q. Production is associated with a marginal private cost, MCP (Q) = Q, and a constant marginal external cost, MCE = 25. Graph inverse demand, marginal revenue, marginal private cost, and marginal ..
As vice president of sales for a rapidly growing company, you are grappling with the question of expanding the size of your direct sales force.
Assume that you go on vacation to France. If the exchange rate value of the dollar increased in relation to the French currency, the euro, would the goods you purchase in France become more or less expensive to you? Would you be likely to buy more go..
In many cases, particularly instances of hyperinflation, we do not observe a stable demand for real money balances that is proportional to real output (i.e, MD/p≠LxY). Explain how we alter the simple monetary model to derive the general monetary mode..
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Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on any income over $70,000. Family A earns $28,000 a year and Famil..
The owner of an exhaustible resource should ________ current extraction rate if the expected price increase of the resource is ________ the interest rate.
terrorist attacks on the World Trade Center and the Pentagon affected short and/or long-term productivity in the United States. Explain your response and show any movements in the PPF.
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