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Harper is spending a three-day weekend at a beach property. Upon arrival, Harper bought a quart of ice cream and must divide consumption of the quart over each of the three days. Her instantaneous utility of ice cream consumption is given by u(c)=c^0.5, where c is measured in quarts, so that the instantaneous marginal utility of consumption is given by 0.5c^(-0.5). Suppose Harper discount future consumption according to the fully additive model, with the daily discount factor δ=0.8. Solve for the optimal consumption plan over the course of the three days by finding the amounts that equate the discounted marginal utility of consumption for each of the three days, with the amounts summing to 1. Now suppose that Harper discounts future utility according to the quasi-hyperbolic discounting model, with β=0.5 and δ=0.8. Describe the optimal consumption plan as of the first day of the weekend. How will the consumption plan change on day two and day three? (quasi) The model thus far eliminates the possibility that Harper will purchase more ice cream. In reality, if the consumption on the last day is too low, Harper might begin to consider another ice cream purchase. Discuss the overall impact of
What is the impact of the following factors on the optimal method of procuring an input. Benefits from specialization. Bureaucracy costs. Opportunism on either side of the transaction. Unspecifiable events. Bargaining costs.
Which of one of the following is an disadvantage of multiple choice questions? How can descriptive statistics be defined. Which measure of varibility describes the average deviation of each score from the mean
Suppose that Campbell's, a major food manufacturer in the United States, can produce either canned soup or canned tomato juice. As a result of an increase in the cost of tomatoes, Campbell's decides to produce more soup and less tomato juice. You cor..
Economists usually do not favor subsidies on specific products or in-kind payments to help low income people.
Farmer Bogus is selling his product in a purely competitive market. His output is 600 bushels which sell for $2 per bushel. At this level of output, marginal cost is $2, average total cost is $7, and average variable cost is $6. Farmer Bogus should p..
The Johnson Corporation produces 1000 wood cabinets and 500 wood desks per year, for total cost of $30,000. It has been estimated that if the firm produced 1000 wood cabinets only, the cost would be $23,000, and if the firm produced 500 wood desks on..
Critically reflect on the importance of capital budgeting. Why is this such a heated subject in many boardrooms? How does capital budgeting promote the financial health of an organization? How will you use the financial techniques you have learned th..
With some services, e.g., checking accounts, phone service, or pay TV, consumers choose between two or more payment plans. One can either pay a high entry fee and get a low price per unit of the service or pay a low entry fee and a high price per uni..
You are working for a company that is considering purchasing a new piece of equipment that will reduce operating costs by $4,000 annually. If the purchase price is $50,000, and it has a 25 year life with a salvage value of $5,000, what is the present..
He wage elasticity of labor supply for men aged 18-25 is measured to be 0.3. Within this group, the average weekly wage of the high-school graduates is 2/3 the amount of college graduates. If male college graduates offer 45 hours of work per week, wh..
The World Bank Doing Business Indicators measure the extent of business regulations in countries around the world. Compare the U.S., France, Japan, Brazil, and Nigeria in terms of how easily contracts are enforced, how property can be registered, and..
The efficient price of a license fee is determined by the difference between ... Which one of the following is least likely to be considered a public good? The two characteristics of a public good are: Which one of the following goods can be consider..
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