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You purchase a new smartphone for $650. Suppose that during one year, there is a 0.2 probability that you will drop the phone, a 0.2 probability you “send it for a swim” (drop it in water), and a 0.6 probability you avoid all accidents. If you drop the phone, you will crack the screen, which must be repaired for $150. If you drop it in water, it will be completely broken and you will have to replace it for the full cost. Assume that forgoing the phone, or using one with a cracked screen, is not an option. a. What is your expected loss from one year of smartphone ownership? b. The sales associate at the store offers to sell you an extended warranty that costs $130. If you damage or destroy your phone accidentally, the store will repair your phone or send you a new one. Assuming you are risk neutral, should you buy the warranty? c. Suppose the warranty costs $130, but in the event of either a cracked screen or broken phone, you must pay a $99 “service fee” before the store repairs your phone or sends you a new one. Assuming you are risk neutral, should you buy the warranty now? (Hint: Start by re-doing part (a) for the expected loss you will suffer if you have the warranty) d. Now let’s suppose you are risk neutral, but especially accident prone. Now there is a 0.3 probability you will crack the screen, 0.3 probability you will drown your phone, and 0.4 probability you will avoid all accidents. Should you buy the warranty as described in part (c)? e. Suppose you are not accident-prone. Can you think of any other situation where it might make sense for you to buy the extended warranty?
illustrate what would be the government spending multiplier. What would be the taxation multiplier.
Illustrate what is the difference among the short-run also the long-run for a perfectly competitive firm in terms of costs also profits.
Sam owns outright (no mortgage payments) two plots of land of equal size in Southern California. One plot is in Victorville (the High Desert) and the other is in the coastal community of Newport Beach. Given that Sam’s calculations were correct on t..
q1. what is the appropriate balance between private and public i.e. government activity? think of a case where the
Joe Showoff bought a Mercedes when he came to Tech as an engineering student (so that his feet would not get cold on the way to those early morning classes). The Mercedes was purchased by making a loan that was to be paid off in 20 equal, quarterly p..
Find at least one scholarly article that criticizes the goal of shareholder wealth maximization. Briefly summarize the criticism(s) offered and discuss whether you believe the criticism is valid. In particular, does the article make you question t..
In this question, you will explain the impact of employment and unemployment in a free market economy. The country of France legislated the maximum length of a workweek. Every election season, the Affordable Care Act commonly known as OBAMACARE, beco..
Derive an expression for average cost. Derive an expression for marginal costs. Is there any range of production characterized by scale of economies? At what production level are scale economies exhausted?
Calculate the annualized value of a building that would cost $1 million to replace and has a life of 25 years. Use interest rates of 5%, 10%, and 15%. Show your calculations not just the final answers. Assume that a piece of equipment has a replaceme..
Illustrate what are the arguments for using real per capita GNI to compare living standards between countries. What weakness does this measure have.
q1. suppose the parliament passes legislation making it more difficult for firms to fire workers e.g. law requiring
An investment pays $2,100 per year for the first 3 years, $4,200 per year for the next 8 years, and $6,300 per year the following 12 years (all payments are at the end of each year). If the discount rate is 8.75% compounding quarterly, what is the fa..
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