3. Suppose your utility function is You have a house whose value is $1,000,000. If an earthquake comes, it will destroy...
Suppose the function u(x) = x0.5 , where x is consumption, represents your preference over gambles using an expected utility function. You have a probability 0.1 of getting consumption xB (bad state) and a probability 0.9 of getting xG (good state). An insurance company allows you to choose an insurance contract (b, p), where b is the insurance benefit the company pays you if the bad state occurs and p is the insurance premium you pay the company regardless of...
Part 3: Longer Problems 1. Suppose that the utility function of a typical visitor to an amusement park is Ur, y) = r - (1/2)r+ y, where r is the number of rides and y is expenditure on all other goods. The current price per ride is p. Each visitor has income of M. The MU, = 1-r. (a) Derive the Marshallian or ordinary demand function for rides. Com- ment the demand function. (b) On a diagram, graph the visitor's...
6. You have u = x1/2 risk averse utility. Your initial wealth consists of $225 cash and a $175 Apple Pencil III. This means that your initial wealth is Xo = 225 +175 = 400. There is a n = 10% chance the pencil will die and be worth $0. Apple offers insurance. They will replace the pencil if it dies. a. What is the maximum fee F, you would pay for this insurance? b. Provide a Utility of Wealth...
Part 3: Longer Problems 1. Suppose that the utility function of a typical visitor to an amusement park is Ur,y) = r - (1/2)r? + y, where r is the number of rides and y is expenditure on all other goods. The current price per ride is p. Each visitor has income of M. The MU=1-r. (a) Derive the Marshallian or ordinary demand function for rides. Com- ment the demand function. (b) On a diagram, graph the visitor's optimal number...
Suppose you are selling car insurance. You have a customer with the utility function U(w)=600-200 Where w is the customer's wealth. With probability 0.1, this customer is going to get into an accident while driving. If there is an accident, the customer would have to pay for all the damages and would end up with wealth of $1. The customer has a 0.9 probability of not getting into an accident, and if this were to happen, the individual would get...
Suppose the function u(x) = x0.5 , where x is consumption, represents your preference over gambles using an expected utility function. You have a probability 0.1 of getting consumption xB (bad state) and a probability 0.9 of getting xG (good state). An insurance company allows you to choose an insurance contract (b, p), where b is the insurance benefit the company pays you if the bad state occurs and p is the insurance premium you pay the company regardless of...
Suppose you have a total income of I to spend on two goods x1 and x2, with unit prices p1 and p2 respectively. Your taste can be represented by the utility function u left parenthesis x subscript 1 comma x subscript 2 right parenthesis equals x subscript 1 cubed x subscript 2 squared (a) What is your optimal choice for x1 and x2 (as functions of p1 and p2 and I) ? Use the Lagrange Method. (b) Given prices p1...
Evaluate the arical writ the response in which you state your agreement or disagreement with writer up un these questions guidelines 1) can empathy lead us astrary? how 2) our heart will always go out to the baby in the well, its a measure of our humanity. but empathy will have to yield to reason if humanity is to have a future can empathy yield to reason? how? thank you The Baby in the Well: The Case against Empathy* -Paul...
Please read the article and answer about questions. You and the Law Business and law are inseparable. For B-Money, the two predictably merged when he was negotiat- ing a deal for his tracks. At other times, the merger is unpredictable, like when your business faces an unexpected auto accident, product recall, or government regulation change. In either type of situation, when business owners know the law, they can better protect themselves and sometimes even avoid the problems completely. This chapter...