What is the economic a expected income

Assignment Help Microeconomics

Reference no: EM132139426

Question: A risk-averse economic agent with a yearly income off $100,000 inherits a vineyard. In dry years, the vineyard's harvest is worth $100,000; in wet years, the vineyard's harvest is worth $20,000. Each year there is a probability of 60% that the weather is dry.

a) After inheriting the vineyard, what is the economic a expected income? gent's

b) In a utility for money diagram, illustrate the agent's monetary outcomes and the agent's expected income.

c) In the diagram, add a utility for money curve and illustrate the agent'sutility outcomes and his expected utility. Suppose a large agri-business offers the agent a long-term contract that pays $68,000 for the vineyard's yearly harvest regardless of the weather.

d) Does the economic agent accept the offer? Why? Suppose instead the economic agent's income of$100,000 is not certain, but it is the expected profit from owning an umbrella factory.

e) In this case, is the economic agent more likely or less likely to accept the offer? Discuss.

Reference no: EM132139426

Questions Cloud

How do book value and market value differ : Question - How do book value and market value differ? Provide an example found in a peer-reviewed journal article

How is poverty measured in the us : How is poverty measured in the US? Is this an effective measurement? What are some of the issues that the government faces in trying to move people out.

What is the franchising fee : What is the franchising fee and PA the manufacturer should choose tomaximize pro?t if this situation is repeated? Assume collusion is impossibleand.

Draw the cashflow ladder for cbc interest rate : BANK3011 BANK FINANCIAL MANAGEMENT ASSIGNMENT, University of Sydney, Australia. Draw cashflow ladder for CBC's interest rate sensitive assets and liabilities

What is the economic a expected income : A risk-averse economic agent with a yearly income off $100,000 inherits a vineyard. In dry years, the vineyard's harvest is worth $100,000; in wet years.

Discuss about the common core state standards : Discuss about the Common Core State Standards and Differentiated learning.

How is the value of a nation currency determined : How is the value of a nation's currency determined? Is there such a thing as its "true" value? Should a government try to influence the value of its currency?

What do you mean by winter compensation : What do you mean by winter compensation from contributions

What structure emerged for the group : What structure emerged for the group? How did your group's process compare to the process described in the textbook?

User Account

All Pages