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1. Suppose a risk-averse consumer has an initial wealth of $5,000 and a utility function U(M) √M.. He faces an 80 percent chance of losing $4000, and a 20 percent chance of losing $0. What is the most a consumer would pay for insurance against these losses? Draw a diagram to illustrate this amount.
2. Suppose a risk-averse consumer has an initial wealth of $7,000 and a utility function U(M) = InM. He faces a 70 percent chance of losing $4000, and a 30 percent chance of losing $6,000. What is the most a consumer would pay for insurance against these losses? Draw a diagram to illustrate this amount.
Find the velocity given that the market is in equilibrium. MD1 is the relevant curve and it is given that the real GDP is 30,000.
Develop an exponential smoothing forecast with smoothing constants α =0.1 and 0.3. What would be the forecast for week 11?
Do the estimated coefficients have the required signs to yield a-shaped AVC curve? Discuss the significance using the p-values.
The rising stock market implies an increase in wealth, at least as measured on paper. If we assume that some of this increased wealth gets consumed, then the rising stock market fuels an increase in aggregate demand, and may contribute to an inflatio..
Explain whether the evidence above suggests whether the dollar is appreciating or depreciating relative to the Euro. What is your conclusion? Explain how you come to that conclusion.
Compute the monopoly equilibrium. Compute the consumer surplus. Assume this firm practices two-parts tariffs, Compute the optimal output.
Suppose that yi receives $ 60 per day as interest on inheritance and her wage is $25 per hour, and she can work a maximum of 16 hours per day at her job. draw her daily budget constraint.
In the country of Wiknam, the velocity of money is constant. Real GDP grows by 5 percent per year, the money stock grows by 14 percent per year, and the nominal interest rate is 11 percent. What is the real interest rate?
Suppose the emarginal cost of producing the good in before question is aconstant $ 10 per unit of output . What quantity of output will the firm produce.
Using the Lerner index, find the price elasticity of demand for Botox and interpret what this value means to total revenue if the price of Botox were increased one percentage point.
How is interest rate described? Why is there a lower present value of goods to be delivered in future? What are their respective interest rates? Illustrate the adjustments which you think will ensue.
Evaluate the following: The laws of supply and demand cannot apply to the labor market because labor is not a commodity to be bought and sold like machines.
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