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Utility

Solve accounting problems

PE 2-14 Expanded Accounting Equation Use the expanded equation to compute the missing quantity. Assets Liabilities Capital Stock Retained Earnings Case A $23,000 $11,000 A $ 4,500 Case B 17,500 B $ 4,500 3,600 Case C C 14,000 11,000 27,000 Case D 45,000 29,000 18,000 D

Choice under uncertainty

(a)Explain what it means that a consumer has preferences over lotteries (in particular, define lotteries). (b)Explain what it means that the preference relation has a utility function representation, and define the notion of a von Neumann-Morgenstern utility function.

Risk, uncertainty and information

1- An agent, with wealth 50, faces a probability 0.2 of a loss 35. The agent is offered insurance at a premium rate of 0.25. The agent has the von Neumann-Morgenstern utility function, u=lnx, where x is wealth. How much insurance should the agent buy? 2 - Show that a risk averse agent offered terms worse than actuarially fair

Diamond/Water

3.Early Classical economists found the following "diamond/water" paradox perplexing: "Why is water, which is so useful and so necessary, so cheap, when diamonds, which are so relatively unnecessary, are so expensive?" In modern economic terms, explain the water/diamond paradox.

Utility, Income Elasticity, and Price Elasticity

PART 1 Please answer the following question: Bob values the utility of a single scoop of Baskin-Robbins ice cream at $1.50. A double scoop gives total utility of $2.25, while a triple scoop yields $2.60. Baskin-Robbins charges $1.35 for a single, $1.95 for a double, and $2.35 for a triple. How many scoops will Bob buy?

Risk, Uncertainty and Information

A firm hires a worker, and the worker chooses between two levels of effort (e), e=1 and e=4. Hiring the worker provides profits (s), and there are two possible levels of profits, s=40 and s=280. If e=1, the probabilities are 0.8 of s=40, and 0.2 of s=280. If e=4, the probabilities are 0.5of s=40 and 0.5 of s=280. The worker's ut

Risk, Uncertainty and Information

Traders are divided into 2 groups, sellers and buyers. Each seller sells one or no cars, and each buyer buys one or no cars. There are more buyers than sellers and the market is competitive. Cars can be "lemons" with quality q=1 or "peaches" with quality q=3. The proportion of lemons is ½. The von Neumann Morgenstern utility fu

Risk, Uncertainty and Information

Important Note: Please try to use mathematical notation as much as you can to demonstrate your answer, but don't forget to carefully define each step you make. Question (a) Define "risk averse". (b) Why does a risk averse agent offered actuarially fair insurance choose to insure fully? (c) What does the agent choose if t

Risk, Uncertainty and Information

Important Note: Please try to use mathematical notation as much as you can to demonstrate your answer, but don't forget to carefully define each step you make. Question (a) What is expected utility theory? (b) On what assumptions is the theory based, and how plausible are these assumptions? (c) Explain the Ellsberg par

Using utility function to solve for optimal choice

Suppose that the typical consumer has the following utility function: U(N, Y) = N×Y, where Y = income or expenditures on goods, and N = leisure (non-work) hours. The wage rate is given by w = $10. The consumer is initially taxed at the proportional rate of t1 = .4. The consumer has no unearned income (Y* = 0). The time const

Utility Maximization Exchange Economy

This question is about Walrasian equilibrium in an exchange economy with 2 goods and 2 consumers. Taxes are introduced in the question to solve for the equilibrium and allocation under Pareto theorem. Question (2) Consider an exchange economy with 2 goods and 2 consumers . Consumer 1's initial endowment is and consum

Consider an exchange economy with two consumers and three goods

The attached question is about 2 consumers with 3 goods in an exchange economy, the consumer's utility functions are given. The question asks to find demand functions for each consumer as well as finding Walrasian equilibrium under certain assumptions. Thanks Question (1) Consider an exchange economy with tw

Public Utilities

This is another one of those questions that isn't really discussed in the textbook and, since I'm not really sure about the difficulties the public utilities face, I have not idea where to begin in answering this question. Some guidance please... "Given the difficulties that the regulation of public utilities faces, would

Optimal Consumption

For each of the following situations, decide whether the bundle Lakshani is thinking about consuming is optimal or not. If it is not optimal, how could Lakshani improve her overall level of utility? That is, determine which good she should spend more on and which good should she spend less on. a. Lakshani has $200 to spend on s

Utility Maximization

Every November, Smith and Jones each face the choice between burning their leaves or stuffing them into garbage bags. Burning the leave sis much easier but produces noxious smoke. The utility values for each person, measured in utils, are listed in the table for each of the four possible combinations of actions: (please see at

Microeconomics / Utility & Behavioral Economics

1. If you were to take $1 from a rich person and gave it to a poor person, the rich person looses less utility than the poor person gains. Would you agree or disagree, and why? 2. Please provide an example of personal transportation choices (1) for short distances (less than 400 miles) and longer distances (in excess of 800 m

Everyone who wants to buy the object writes down a number.

Suppose someone is selling some object in the following (kind of unusual) way. Everyone who wants to buy the object writes down a number. The person who wrote the highest number gets to buy the object, but gets charged the second highest number. All player's have a private value from the object, which is random. Suppose t

MANAGERIAL ECONOMICS QUESTIONS

CH 18-4 Some people are good drives and others are bad drives. The former have a 10% chance of crashing their cars and the later have a 30% chance. All have a total wealth of 400 but this will fall to 100 if they crash their cars. In other words, each will lose 300 of wealth if crash. You're an insurance company who wishes

Economics Questions

Economics Question 1 Raju has $100 a week to spend on itunes and cases of beer. The price of an itune album is $10; the price of a case of beer is $20. He faces the following indifference curves: a. What is the relative price of an album in terms of cases of beer? b. Calculate the opportunity cost of consuming a case of b