Consider a trader i has following utility function: u;(x1, X2) = x† xª, 1-a where x; refers to the quantity of asset with price pi, and i = 1,2 in this case. Suppose the total money of this trader to be completely used for trading is M, and during the whole trading process the price of asset remains constant. (a) Determine the optimal quantity x for each asset that this trader can buy when she wants to maximize her utility function. (b) Describe in words about her preferences correponding to a = 0, a = 1, and α 0.5.
Q: Socialization is defined as ________. A. the process of adjusting and adapting to a…
A: The process of internalizing societal norms and ideals is known as socialization.Learning and…
Q: Define the terms briefly: What is reserve price? What do we understand by the phrase" costs do not…
A:
Q: A firm has invested a sum of £100 million to construct new manufacturing plant. Workers spend 90 per…
A: "The size of investment multiplier tells how much a rise in income occurs when autonomous investment…
Q: A monopolistic monopsonist faces labour supply w = 20 + 0.05L, market demand p = 800 – 7.5q and has…
A: TR = P*q = (800-7.5q)q MR = dTR/dq = 800-15q q = 0.1L MPL = dq/dL = 0.1
Q: How are the core and peripheral tiers changing?
A: As a consequence of their huge influence on global economic and social development, core-periphery…
Q: Suppose we allocate a fixed supply of a depletable resource between two periods in a dynamically…
A: *Answer:
Q: Which of the following statements is correct? ____ If supply increases and demand decreases,…
A: Demand curve is a downward sloping curve that shows a negative relationship between price and…
Q: 1. Plot the graph of the demand and supply schedule below, determine the equilibrium quantity and…
A: Equilibrium occurs when the quantity supplied is the same as the quantity demanded. If the quantity…
Q: If the U.S. Congress imposes a quota on imports of Japanese cars due to claims of "unfair" trade…
A: The imposition of import quota by the U.S. will reduce the export of Japanese cars and increase the…
Q: 2000 2007 200n 2000 2010 YEAR e the following table by indicating the exchange rate path for each…
A: All answers given below,
Q: Which of the following is NOT implied by the Quantity Theory of Money (QTM)? a With constant money…
A: Quantity theory of money shows the relationship between money supply, velocity, price level and real…
Q: Given the demand function D(p) = V200 – 4p, Find the Elasticity of Demand at a price of $40
A:
Q: 4. Consider the case where countries are free to specialize and trade. In the table below calculate…
A: Opportunity cost is the next best alternative choice.
Q: Given the demand function D(p) = 175 – 2p², %3D Find the Elasticity of Demand at a price of $1
A:
Q: You are Lori Lightfoot. The city needs money. You are contemplating 2 sources of revenue: levying…
A: Introduction Here we have given different prices level of gas with different demand. At first we…
Q: 5) The First cost of a passenger bus is P800,000. Its estimated life is 4 years with no salvage…
A: The annual worth or AW method refers to the value for an alternative, comprising of two prime…
Q: Consider a two-period intertemporal choice model in which your endowment of income in the two…
A:
Q: If households from a small open economy expect future income to be lower than expected, then the…
A: The compensation that is being received by the workers or employees through fulfilling various types…
Q: Assume at the level of output where MC=MR, a firm experiences TR = $40,000 per week, TFC = $100,000…
A: The Total Fixed Cost (TFC) is the summation of all the costs that do not vary with the level of…
Q: 田 COUNTRY B HIGH TARIFF LOW TARIFF HIGH TARIFF $1M $1 M $2M, $1.5 M COUNTRY A LOW TARIFF $1.5 M, $…
A: [1] When Country A goes for:-High Tariff then Country B goes for Low tariffLow Tariff then Country B…
Q: solve this cash flow 500,000 EOSA 35,000 A-? i: 52% querterly
A: The entrance and outflow of cash and cash equivalents are referred to as cash flow. The cash flow of…
Q: At the economy's natural rate of unemployment Multiple Choice there is only a relatively small…
A: Natural rate of unemployment is that unemployment that occurs when the economy is in the long run.…
Q: Assume that there are two firms in the market described by the inverse demand function…
A: Monopoly refers to the market in which a firm charges a different price above the marginal cost. It…
Q: For a perfectly competitive firm operating in the short run, in order to maximize profits it should…
A: In a perfectly competitive market, price is constant so it is equal to marginal revenue. Firms are…
Q: Question has two parts please answer both the parts: i): supply ii): Laws of supply iii):…
A: i): Supply:
Q: Solve: 1. A/G, 10%, 5 2. P/G, 9%, 7 3. F/G, 0.25%, 10 4. P= ?, rate of increase = 2%, i=10%, n=30 5.…
A: Note:- Since we can only answer up to three subparts, we'll answer the first three. Please repost…
Q: Assess the effects of Price floor [20 marks]
A: The market equilibrium is achieved where the demand and supply for a product are equal to each…
Q: What is the distinction between the laws and of returns and the returns to scale?
A:
Q: Q)What is empowerment? How can the psychological components of empowerment be examined at the macro…
A: Empowerment: It can be defined as the upliftment of human resources, if either men or women are not…
Q: What is the relationship in ADAS between oil price and inflation and also the unemployment rate?…
A: In the mentioned question we have been asked what is the effect of oil prices on inflation and…
Q: When it comes to getting a college education, most people consider not O their self-interest; the…
A: Externality refers to spill-over effect of a good or service on the society.
Q: The White Swan Talc Company paid $120,000 for mining equipment for a small talc mine. The mining…
A: Under the SYD technique, the depreciation rate for every year is determined as the number of years…
Q: two following alternatives should be chosen using the following methods? DRAI Pamper pipes P 75,000…
A: *Answer:
Q: An increase in the tax rate on interest income will lead to: Select one: O a. More saving, more…
A: When talking about interest income, it is the amount of money earned by j individual when he invests…
Q: Use the figure below to answer the following question. Quantity An increase in quantity supplied is…
A: A change in quantity supplied is the change in the quantity a producer is willing to offer when the…
Q: 16. Calculate the profits for firm 1 for the situation described in question 15 before, where the…
A:
Q: a. What is the profit-maximizing output? Output: b. What price will the firm charge? Price: $ c. How…
A: In monopolistic competition, there are many firms with free entry and exit. Long run economic profit…
Q: How Goods Market will be in Equilibrium according to the saving and investment approach?
A: PLEASE FIND THE ANSWER BELOW.
Q: Suppose that the monopolist can produce with total cost: TC = goods in two different markets…
A: Given that, The demand curve for first market is Q1 = 240 - 4P1 The demand curve for second market…
Q: What is the size of market aslo explain the character of the commodity in our daily lives,?
A:
Q: A downward sloping Philips curve implies that output increases as inflation rises. TRUE / FALSE An…
A: In economics, the Phillips curve is used by economists and policymakers to explain the relationship…
Q: Consider the issue of government intervention in a market economy. Please provide brief discussions…
A: Government intervention in an economy is a talk about the presence of public power which has this…
Q: Critically compare the principles of the IRR and net present value methods including their…
A: B. Compare the principles of the IRR and net present value The net present value rule states that…
Q: (a) Which cost includes third-party costs: private costs or social costs? (b) Which are…
A: a) A private cost refers to the cost incurred by the producers while producing goods and services…
Q: Suppose that there are two firms producing a homogenous product and competing in Cournot fashion anc…
A: Given Market demand function: Q=360-P4 ... (1) MC=0 and TC=0 for both firm
Q: QUESTION 16 Which of the following describes the breakeven point O a. total revenue explicit costs…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: What are the benefits and costs of land- use regulations such as inclusionary zoning for urban…
A: The process of converting physical inputs into output is known as production. The four components of…
Q: If Canada borrows more from the foreign countries than it lends to the foreign countries, then…
A: here we find the correct answer as follow;
Q: 3.1. Explain, with the aid of examples, the following economic concepts in terms of utility theory:…
A: Utility means satisfaction which is derived by the consumption of goods and services . There are…
Q: In an economy such as Canada's, absorbs some of the available for investment, driving the interest…
A: The policies related to the economy of Canada have been discussed.
Hello, here are HW excercises I'm having trouble understanding.
Step by step
Solved in 2 steps
- 2. Alice believes that her car would cost £12500 to replace if it was stolen or damaged. Based on crime statistics for the area she lives in, she believes that the probability of her car being stolen or damaged is 0.15. (i) Alice's utility function is given by U(w) = ln(w) for w > 0 and she as £35000 in the bank. Calculate how much Alice would be prepared to pay (in a single payment) to insure her car against theft or damage (ii) Repeat the calculation in the previous part but now assume Alice has £500000 in the bank.4) Luke is planning an around-the-world trip on which he plans to spend $10,000. The utility from the trip is a function of how much she spends on it (Y ), given by U(Y) = InY a). If there is a 25 percent probability that Luke will lose $1000 of his cash on the trip, what is the trip's expected utility. b). Suppose that Luke can buy insurance to fully against losing the $1,000 with a actuarially fair insurance. What is his expected utility if he purchase this insurance. Will he purchase the insurance? c). Now suppose utility function is U(Y) = Y/1000 What is his expected utility if he purchase the insurance in b). Will he purchase the insurance?Utility Theory You live in an area that has a possibility of incurring a massive earthquake, so you are considering buyingearthquake insurance on your home at an annual cost of $180. The probability of an earthquake damagingyour home during one year is 0.001. If this happens, you estimate that the cost of the damage (fully coveredby earthquake insurance) will be $160,000. Your total assets (including your home) are worth $250,000. A. Apply Bayes’ decision rule to determine which alternative (take the insurance or not) maximizes yourexpected assets after one year.
- Microeconomics Wilfred’s expected utility function is px1^0.5+(1−p)x2^0.5, where p is the probability that he consumes x1 and 1 - p is the probability that he consumes x2. Wilfred is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2500 with probability p = 0.4 and $3700 with probability 1 - p. Wilfred will choose the sure payment if Z > CE and the lottery if Z < CE, where the value of CE is equal to ___ (please round your final answer to two decimal places if necessary)Gary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary’s boat wins, Donna would give him $31. If Gary’s boat does not win, Gary would give her $31. Gary’s utility function is p1x^21+p2x^22, where p1 and p2 are the probabilities of events 1 and 2 and where x1 and x2 are his wealth if events 1 and 2 occur respectively. Gary’s total wealth is currently only $80 and he believes that the probability that he will win the race is 0.3. Which of the following is correct? (please submit the number corresponding to the correct answer). Taking the bet would reduce his expected utility. Taking the bet would leave his expected utility unchanged. Taking the bet would increase his expected utility. There is not enough information to determine whether taking the bet would increase or decrease his expected utility. The information given in the problem is self-contradictory.Gary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary's boat wins, Donna would give him $31. If Gary's boat does not win, Gary would give her $31. Gary's utility function is p1x^21+p2x^22, where P₁ and p2 are the probabilities of events 1 and 2 and where x₁ and x₂ are his wealth if events 1 and 2 occur respectively. Gary's total wealth is currently only $80 and he believes that the probability that he will win the race is 0.3. Which of the following is correct? (please submit the number corresponding to the correct answer). 1. Taking the bet would reduce his expected utility. 2. Taking the bet would leave his expected utility unchanged. 3. Taking the bet would increase his expected utility. 4. There is not enough information to determine whether taking the bet would increase or decrease his expected utility. 5. The information given in the problem is self-contradictory.
- Assume that Rosemarie has the following utility function: U(W) = W1/2. She is selling her homeand believes that the house will sell for $250,000 with probability ¼ and $122,500 withprobability ¾.a. What is her expected utility?b. What is the risk premium (P) Rosemarie would pay to avoid bearing this risk?. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index . There is a 1 % probability that there is flooding damage at her house. The repair of the damage would cost £80,000 which would reduce the income to £10,000. a) Would Priyanka be willing to spend £500 to purchase an insurance policy that would fully insure her against this loss? Explain.Sadija has a concave utility function of U(W) = In(W). She has inherited a ring from a relative, but she is unsure about its value. She believes that it is worth £6,000 with a probability of 1/3 and £3,000 with a probability of 2/3. a. Ahmed would like to buy the ring from her. Which price would he need to offer for Sadija' utility to remain unchanged after the sale? b. In fact, Ahmed offers £4,000 for the ring. What can you infer about Ahmed?
- 5. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index u(x) = √√x. There is a 1 % probability that there is flooding damage at her house. The repair of the damage would cost £80,000 which would reduce the income to £10,000. a) Would Priyanka be willing to spend £500 to purchase an insurance policy that would fully insure her against this loss? Explain. b) What would be the highest price (premium) that she would be willing to pay for an insurance policy that fully insures her against the flooding damage?Your utility function is given by M1/2. You have $100 and are planning to invest in a venture where you can win or lose 50 with equal probability. Will you accept the venture? What is the minimum gain you need to make in the good scenario such that you will invest in the venture?5. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index u(x) = √x. There is a 1 % probability that there is flooding damage at her house. The repair of the damage would cost £80,000 which would reduce the income to £10,000. I Would Priyanka be willing to spend £500 to purchase an insurance policy that would fully insure her against this loss? Explain. What would be the highest price (premium) that she would be willing to pay for an insurance policy that fully insures her against the flooding damage?