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Anne faces an uncertain World with two possible states, good and bad. In the good state she has money holding MG and in the bad state, she has money holdings MB. We will write the money bundle M = (MG, MB). The good state is realized with probability Π and the bad state is realized with probability 1 - Π. Anne's preferences are characterized by expected utility function, U (M) = Π√ MG + (1 - Π) √ MB. Let Π = 3/4. 1. How does Anne rank the following three bundles M1 = (100, 100), M2 = (50, 250), M3 = (120, 40)? 2. What is Anne's expected money holdings for the three bundles? (that is, weighted average money holdings over the two states). 3. Draw Anne's indifference curve for expected utility, U (M) = 10. 4. In the same graph, draw the constant expected money holdings line for expected money holding of 100 (that is, money bundles M that all have the same expected money holdings). 5. Is Anne risk loving, neutral, or averse? 6. In the same graph as above, draw Anne's indifference curve for U(M) = 10, but now set Π = 1/2.
Mr. and Mrs. Ward typically vote oppositely in elections and so their votes "cancel each other out." They each gain two units of utility from a vote for their positions (and lose two units of utility from a vote against their positions). However, ..
proper health and nutrition is of critical importance to the growth and development of young children yet many american
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Assume that an economy producing two products, skateboards and in-line skates, is initially in equilibrium, and that skateboards and in-line skates are substitutes. If consumer preferences shift away from skateboards and toward in-line skates, which ..
Compute the price elasticity of demand using the point formula for Px = 20 and Py = 10. Determine whether demand is elastic, inelastic, or unit elastic with respect to its own price and whether Good Y is a substitute or a complement with respect t..
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the demand curve is given byqd 500 - 5px 0.5i 10py - 2pzwhereqd quantity demanded of good xpx price of good xi
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