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1. In order to boost funding for the state of Florida or Mississippi, depending on where you are, each state has decided to start a daily drawing where people can purchase a ticket for $1 with a 3-digit number from 000-999. If the number on the ticket matches the number drawn, the person wins $500. Suppose a person is risk neutral, i.e., their utility is linear in income. In this case U=Y. Show that a risk neutral person will never purchase a lottery ticket. Why then do so many people purchase these types of lottery games? (Hint: what is the Expected outcome from the gamble?)
2. Your firm has been sued for $3 million by a supplier for breach of contract. Your lawyers believe that there are three possible outcomes if the suit goes to trial. One, which the lawyers term “highly improbably,” is that your supplier will win the lawsuit and be awarded $3 million. Another, which the lawyer term “unlikely,” is that your supplier will win the lawsuit and be awarded $500,000. The third which the lawyers term “likely,” is that your supplier will lose and the lawsuit and be awarded $0. You have to decide whether to try to settle the case. To do so you need to assign probabilities to “highly improbable,” “unlikely” and “likely”. What probabilities correspond to these statements? Going to trial will cost you $100,000 in legal fees. One of your lawyers believes that your supplier will settle for $100,000 (and you will have legal fees of $25,000). Should you settle?
Define benefit and cost externalities. Explain why situation involving benefit externalities tend to result in an under allocation of society’s scarce resources.
Illustrate which offers the higher expected return. If you expect the rate of inflation to be 3% over the next year, which is the better investment.
The cost of repairing the valve now is $10,000; and of replacing it is $20,000. If the criterion is to minimize expected costs, which alternative is best?
Is there a relationship between GDP and the business cycle. If so, explicitate relationship exists and how might a business manager use this information to increase their profits.
Suppose that we are testing whether five population means are equal to each other. We would normally use ANOVA for that, but suppose that we carry out separate hypothesis tests in which we compare the five means to each other, two at a time. Using a ..
Create a scenario around this business in which a manager would decide to either stop operations in the short-run or going out of business in the long-run.
If you invest $600 in a stock, borrowing $540 of the $600 at 10 percent interest, and the stock price rises by 25 percent, what is the return on your investment?
Critically evaluate measures used by governments and central banks to manage the economies of their countries. By critical evaluation use convincing arguments for or against measures used to reduce, minimise or alleviate economic difficulties many..
Discouraged employees are not considered unemployed. People who work part time but want to be working full time are considered employed.
To save on gasoline expenses, Edith and Mathew agreed to carpool together for traveling to and from work. Edith preferred to travel on I-20 highway as it was usually the fastest, taking 25 minutes in the absence of traffic delays. Mathew pointed out ..
the hhi for automobiles is 2350 for sporting goods is 161 for batteries is 2883 and for jewelry is 81. which of these
The markets will over produce goods that have external costs because
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