Drawing Conclusions Suppose that you went to a farmers’ market and found several different farmers selling...
Drawing Conclusions Suppose that you went to a farmers’ market and found several different farmers selling cucumbers. Would you be likely to find a wide range of prices for cucumbers? Why or why not?
Homework Answers
No, the price of cucumber in the market will be the same. If any farmer is selling the cucumber at a lower cost he will sell it fast and people will demand more from that particular farmer. Increased demand will prompt that farmer to increases the price of his good.
Similarly, if a farmer is selling cucumber at a higher cost the demand for his cucumber will be low, this will force him to sell at a lower cost.
Both the types of farmers, one selling at a higher price and one selling at a lower price will settle at the same price in the market. We call it the equilibrium price where the demand is equal to the supply of cucumber.
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Drawing Conclusions Suppose that you went to a
farmers’ market and found several different farmers selling...
You are considering an investment in the bonds of the Front Range Electric Company. The bonds pay interest quarterly, will mature in 15 years, and have a coupon rate of 4.50% on a face value of $1,000. Currently, the bonds are selling for $950.
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Question 1 Suppose you have conducted a market experiment where you are interested in understanding the effects of different institutions have on the price of a transaction. Specifically, you wanted to see if a market where sellers had to post their prices would result in higher prices on average than a market where buyers and sellers negotiated in a decentralized manner Your experiment market has the following set of buyers' valuations and sellers' costs. 2 34 5 6 6 7...
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Buying and selling prices for risky investments obviously are related to certainty equiva- lents. This problem, however, shows that the prices depend on exactly what is owned in the first place! Suppose that Peter Brown's utility for total wealth (A) can be represented by the utility function U(A) In(A). He currently has $1000 in cash. A business deal of interest to him yields a reward of $100 with probability 0.5 and $0 with probability 0.5. a If he owns this...
3. Applying the central limit theorem Suppose you are a television network executive interested in how a new pilot show, Statistics, will be received by the general U.S. television-viewing population. You hire several market research firms; each recruits a random sample of television viewers and asks them to watch the pilot of Statistics. Each firm then gathers 25 respondents and asks each of them, "On a scale of 1 to 10, where 1 means you'll never watch Statistics again, and...
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