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John’s utility of income function is U(I) = 10√I(10 sqroot I). Is John risk averse, risk loving, or risk neutral? First answer based on the shape of the utility function, then consider the following scenario. Assume that John owns a lottery ticket that pays him $1000 with probability 0.1 and nothing with probability 0.9. a) What is the expected income that John will receive from this lottery? (100) b) What is the expected utility that John will receive from this lottery? (31.62) c) Assuming that John has a choice between keeping the lottery ticket and selling it for a price equal to $100 (the expected income), what will John do? What does that imply about his attitude towards risk? Is your answer the same with the answer you provided initially, based on the shape of the utility function? (it should be!)
An elderly physician has built up his own practice into a quite valuable business. Now that he is thinking of retiring, he wants to take on a partner to learn the business and eventually buy the practice in three years. Discuss the plusses and minuse..
Now? suppose? that? the ?first ?firm? has? a ?capacity ?of ?2 ?and? the? second? firm? has ?a ?capacity ?of ?4.
At an urban college where most students commute to classes, there are 8,000 parking spaces for students. All students pay $150 a semester for a pass that allows them to park in any one of those 8,000 spaces. Illustrate the parking situation for these..
Which of the following will occur if labor demand and supply simultaneously increase?
Suppose that you purchase a Treasury bond futures contract at $95 per $100 of face value. (LG 23-2) What is your obligation when you purchase this futures contract? If an FI purchases this contract, in what kind of hedge is it engaged? Assume that th..
Identify which of the following statements is always true for a natural monopoly as the number of units produced (output) increases.
How do the salaries of major league baseball rookies and free agents demonstrate the market principles of supply and demand?
What is an accounting identity? The account identity that is used to estimate the gross domestic product of a country is given by. What important factors do GDP estimates leave out? (check all that apply) Which of the following news stroies (all publ..
Consumers borrow money for many different reasons, including the purchase of a home, car, and appliances, to remodel, or to help pay for college. Approximately 75% of U.S. households carry some debt. What is the median amount of household debt? Provi..
A company currently has a machine (defender) which was purchased 9 years ago at a cost of $70,000 and an expected annual operating cost of $ 16,000. It was expected to last 15 years with a salvage value of $ 18,000. Analyze the defender (new) v. the ..
What institutions are prerequisite for economic growth? What is the role of rule of law in economic development?
A firm uses 50,000 workers to produce 200,000 units of output per day. Compute the values for the following four formulas.
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