Find the total wealth

Assignment Help Microeconomics
Reference no: EM131524529

Question: A bettor with utility function U(x) = ln(x), where x is total wealth, has a choice between the following two alternatives:

A Win $10,000 with probability 0:2

Win $1,000 with probability 0:8

B Win $3,000 with probability 0:9

Lose $2,000 with probability 0:1

a. If the bettor currently has $2,500, should he choose A or B?

b. Repeat a, assuming the bettor has $5,000.

c. Repeat a, assuming the bettor has $10,000.

d. Do you think that this pattern of choices between A and B is reasonable? Why or why not?

Reference no: EM131524529

Questions Cloud

Calculate the eu of the probabilistic insurance : You have considered insuring a particular item of property (such as an expensive camera, your computer, or your Stradivarius violin), but after considering.
Who is trying to prevent discrimination in the workplace : Using the articles and video as resources. What suggestions would you offer a manager who is trying to prevent discrimination in the workplace?
What if he loses the bet : An investor with assets of $10,000 has an opportunity to invest $5,000 in a venture that is equally likely to pay either $15,000 or nothing.
Identify all of the stakeholders in the water crisis : Identify all of the stakeholders in the water crisis, and list specific steps the city leadership can take to improve their image and restore public trust.
Find the total wealth : A bettor with utility function U(x) = ln(x), where x is total wealth, has a choice between the following two alternatives.
Discuss the linear-plus-exponential utility function : Repeat Problem II with U(x) = 0:0003x 8:48e-x/2775. A utility function of this form is called linear-plus-exponential, because it contains both linear.
Right-now rapid delivery service : As a manager employed by Right-Now Rapid Delivery Service, you are responsible for pricing the services involving same-day deliveries.
What is the smallest amount for which he would sell the deal : Buying and selling prices for risky investments obviously are related to CEs. This problem, however, shows that the prices depend on exactly what is owned.
Which ratios measure a corporations liquidity : Which ratios measure a corporation's liquidity? What are some of the problems associated with using financial ratios?

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Interference by central planners into family choices

How might this lead to further interference by central planners into family choices - What would be the effect of raising the price of gasoline in the United States to $5 per gallon?

  New miles-per-gallon requirements

What costs associated with the new miles-per-gallon requirements arise from decisions made in self-interest and in the social interest?

  While industrialised countries manufacturing tariffs

While industrialised countries manufacturing tariffs have been cut significantly as a result of the past GATT rounds, agriculture remains heavily protected in many countries. Briefly discuss the welfare effects on domestic and international consumers..

  What is the differences between sticky

What is the differences between sticky and flexible prices in the aggregated income or expenditure?

  How many toys must company sell to break-even in first year

Given the nature of the industry competition and technology, he is planning 3-year horizon for his project. Assuming a cost of capital of 10%, determine whether the project is viable using Net Present Value approach.

  What is the effectiveness of the drug

In one year, 30 persons per 1,000 die of asthma. A new drug reduces that number to 20 per 1,000. How is outcome defined, and what is the "effectiveness" of the drug?

  This document shows the uses supply and demand model to

this document shows the uses supply and demand model to explain the evolution of the price of gold and silver. document

  Public transportation daily

In San Francisco, 30% of workers take public transportation daily

  Do you think fed chairman was a good appointment

The economy begins in long-run equilibrium. Then one day, the president appoints a new chairman of the Federal Reserve. This new chairman is well-known for his view that inflation is not a major problem for an economy.

  If cross-elasticity is estimated to be 15 and ubs doesnt

a bookstore opens across the street from the university book store ubs. the new store carries the same textbooks but

  How many units will the consumer buy in total

The firm is considering a quantity discount. The first 400 units can be purchased at a price of $120, and further units can be purchased at a price of $80. How many units will the consumer buy in total?

  Determine the optimal size of the shopping center

Determine the optimal size of the shopping center (to the nearest 100 square meters) based on existing estimates of the demand for retail space.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd