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Q1. Suppose an investment can yield three possible cash flows with their probabilities given in the parentheses: $600(p=0.5); $-100 (p=0.2) and $800 (p=0.3). a) Compute the expected value and the standard deviation of this investment. Is this investment risky? Why? b) The equation E(x)=359 + 0.5SD describes the indifference curve of this investor. Is this investor risk averse, risk neutral, or risk loving? Explain your answer and draw the curve. c) How much would this person pay for the investment opportunity (certainty equivalent of the current investment)? How much is risk premium for the current investment? Q2. Patrick consumes only two goods: Celtic Music concerts and Celtic Springs Water. Patrick earns $100 per month at his part-time job in the library. The price of Celtic concerts is $10. The price of Celtic Springs Water is $2. Patrick currently goes to 5 Celtic concerts and consumes 25 bottles of Celtic Spring Water in a month. (a) Draw Patrick''s budget constraint and optimal consumption bundle. Please put Celtic concerts on the x-axis. (b) In April Patrick receives a 5% pay increase. Meanwhile the inflation raises the price of concerts to $10.50 and the price of Celtic Springs Water to $2.10. Draw Patrick''s new budget constraint and optimal consumption bundle. Please put Celtic concerts on the x-axis. How many Celtic concerts does he attend in April? How many bottles of water does he drink in April?
You would like to determine if the average golf scores for women are different from the average golf scores for men. A random sample of female students scored an average of 115 with 95% confidence interval (112, 118). A random sample of male stu..
Determine what are the impacts of innovation and technology on the cost of production and explain how does technology affect market structure and real world competition?
Recent increases in rents have caused the citizens of Elmville to vote for a rent ceiling of $1200. Assuming all rental units in Elmville are identical and the supply and demand for rental units are given by Qs = -1000 + 20P Qd = 50000 - 10P
Microeconomics is considered to be the study of scarce resources. Here, customers must make allocation decisions. These 3-basic trade offs include which goods or services are to be manufactured,
Employ the following information on hypothetical short-run production function to answer questions a-d. Compute the marginal and average variable product of each unit of labor input. Hint: plot your Units of labor and Units of Output vertically.
Many suppliers experience economies of scale as output expands, which implies that long-run average costs are falling. At very high levels of production, however, many firms are likely to experience diseconomies of scale.
What was the relationship between cotton and the slave economy in the antebellum American South. was cotton expansion necessary for the continuation of slavery. Was slavery necessary for the growth of the cotton industry.
Firm A is the sole supplier of a certain product. A's marginal cost equals average cost MC = AC = 30, and it faces market demand given by inverse demand function P = 120 0:5Q. Suppose at the moment A produces quantity q = 120 units at price p = ..
Suppose that Apple must pay a royalty on each mobile device that it produces. How should Apple adjust its production and price in response to the royalty?
The output effect of an increase in the wage comes about because higher wages:
The demand for new homes in the United States is often described as highly cyclical and very sensitive to housing prices and interest rates.
Sam and Julie are talking about how much they like going to the fitness and how much they like eating out at their favorite restaurant. A session at the fitness costs the same as a meal at the restaurant. Sam says that, for his current consumption..
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