Risk averter-risk lover or risk neutral

Assignment Help Business Economics
Reference no: EM131009744

The CEO of a publishing company says she is indifferent between the certainty of receiving $7,500 and a gamble where there is 0.5 chance of receiving $5,000 and a 0.5 chance of reveiving $10,000. Also, she says she is indifferent between the certainty of reveiving $10,000 and a gamble where there is a 0.5 chance of receiving $7,500 and a 0.5 chance of receiving $12,500.

a) Draw four points on the utility function of this publishing executive.

 

b) Does she seem to be a risk averter, a risk lover, or risk neutral?

Reference no: EM131009744

Questions Cloud

Fee charged on any balances transferred : Your Christmas ski vacation was great, but it unfortunately ran a bit over budget. All is not lost: You just received an offer in the mail to transfer your $13,200 balance from your current credit card, which charges an annual rate of 21 percent, to ..
Calculate the compensating variation-equivalent variation : Emma’s preferences can be represented by U(x,y) = min {x,y}, where x is pairs of earrings and y is necklaces. She faces prices (px,py) = (2,1) and her income is 12. What is Emma’s optimal bundle of earrings and necklaces? Calculate the compensating v..
Use indifference curve-budget line diagram for food : There are many “in-kind” versus cash payments made by the government to citizens such as food stamps, medical care, and public housing. Use an indifference curve/budget line diagram for “food” and “all other goods” to demonstrate that receiving food ..
Received an equivalent amount of cash assistance : There are many “in-kind” versus cash payments made by the government to citizens such as food stamps, medical care, and public housing. Use an indifference curve/budget line diagram for “food” and “all other goods” to demonstrate that receiving food ..
Risk averter-risk lover or risk neutral : The CEO of a publishing company says she is indifferent between the certainty of receiving $7,500 and a gamble where there is 0.5 chance of receiving $5,000 and a 0.5 chance of reveiving $10,000. Draw four points on the utility function of this publi..
What is the value of government securities the fed : Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, what is the value of government securities the Fed must purchase if it wants to increase the money supply by $2 million?
Demand for cigars is highly inelastic : A cigar seller notices that the demand for cigars is highly inelastic. In an attempt to increase revenue, he lowers cigar prices. Explain briefly whether he has made the right or wrong decision and why? For full credit you have to use a diagram to ma..
Equilibrium price and equilibrium quantity of pasta : Assume that the price of wheat [an important input in the production of pasta] has decreased and at the same time, good economic conditions have increased the income of consumers. If pasta is an inferior good, show graphically and briefly explain wha..
Future development of social welfare programs : Create a PowerPoint presentation addressing the following three questions for each of the three eras of social welfare history you chose. Groups: Who are the groups needing services and what are their needs for each of the three time periods you have..

Reviews

Write a Review

Business Economics Questions & Answers

  Weather phenomenon called the dust bowl also occurred

During this time period, a weather phenomenon called the Dust Bowl also occurred. Conduct an Internet search on The Dust Bowl to discover more about it.

  Consumers indifference curve

The following questions refer to the following graph of a consumer's indifference curve. What is the consumer's marginal rate of substitution between points A and C? What is the consumer's marginal rate of substitution between points C and B?

  What is the percentage change in the effective exchange rate

Suppose 80% of US trade is with Canada and the rest is with Mexico. If the dollar appreciates by 10% against the Canadian dollar and appreciates by 20% against the Mexican peso, what is the percentage change in the effective exchange rate of the Unit..

  What is his quantity supplied

Over 4000 individuals called up Dr. Kalikorn and asked him to perform a new surgical procedure. Dr. Kalikorn booked 2000 of these and told the rest to seek care from another physician. What is his quantity supplied? Explain.

  Quantity produced in monopolistic competition is inefficient

Compared with perfect competition, quantity produced in monopolistic competition is inefficient as price is higher than marginal cost (i.e. allocative inefficiency). Why do some economists argue that even if price is higher than marginal cost, it doe..

  What is the efficient level of water quality

We are concerned with the water quality in the Mississippi River. There are 4 groups of people who use the river: environmentalists, fishermen, sightseers, and wastewater plant executives. What is the efficient level of water quality?

  Relationship between elasticity and marginal revenue holds

For each of the linear demand function p = -6q + 540 Calculate the price elasticity and write it only as a function of q, Calculate the marginal revenue, Draw demand and marginal revenue together on 1 graph. Show that the expected relationship betwee..

  Differentiate between real and nominal gdp

Let's take a look at all the posts above on the definition of GDP. Those definitions of GDP usually assume constant prices even though there is no clear reference to prices in the definition. That is why economists usually like to differentiate betwe..

  Derive each fishermans best response function

Two identical fishermen, Jill and Kevin, fish from the same lake. Since they are only two small producers, they cannot effect the price paid for their fish (P = 100), but they do influence each other’s costs. Write down the profit function for each f..

  What is country is growth rate for output-output per worker

A country is described by the Solow growth model. It has a population growth rate of 5 percent and a rate of technological progress of 3 percent. It is currently at the steady state. What is the country is growth rate for output and output per worker..

  Some ways we can avoid hindering leadership

Let's try to define the attributes of a good follower. What does it take to be a good follower? How can we support the leader in our team? What are some ways we can avoid hindering leadership?

  During an episode of hyperinflation

During an episode of hyperinflation, people tend to do which of the following?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd