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Wildcat Co. has to decide whether or not to drill an oil well. It has $100 current income. Drilling would cost $100; if oil were struck, the company would receive $200 for the oil. If the field is dry, nothing is recovered.
(a) Suppose Wildcat's U-function is U=y where y is income. Suppose the probability of striking oil is 0.6. Should Wildcat drill? At what probability would Wildcat be just indifferent between drilling or not?
(b) Now suppose the U-function is U=2y1/2. Is Wildcat risk averse? Using this function, answer question (a).
(c) Suppose for $20, Wildcat could run a test that would determine for certain whether the field is wet or dry. The probability of a positive test is .6. Would the Wildcat with utility as in (a) do this test? (Assume that if the field is wet, they can borrow at zero interest the extra $20 needed to drill - to be repaid immediately.) What is the maximum amount Wildcat would pay for the test? For which U-function does the company value the test higher?
A needed service can be bought for $550 per unit. The same service can be provided by equipment that costs $225,000, has a salvage value of $75,000 at the end of 10 years and costs $21,500 annually plus $35 per unit to operate.
When the colts won the super bowl the demand for peyton manning's jersey was: P = 210 - 0.002Q with a corresponding marginal revenue of: MR = 210 - 0.0004Q IF the marginal cost of producing a jersey is $10, how much are the trademark licensing rig..
I have a time series set of data of workers in motor vehicle industry from 1972-2001 as well as average weekly hours of workers in motor vehicle industry
Assume the players are monopolists, but the teams are competitive in the labor market. Calculate the marginal revenue product of labor (MRPL) and find the equilibrium wage and quantity of labor.Find the equilibrium wage and quantity of labor.
The four-firm concentration ration for the 494 breweries operating in the US is 91 percent, your team has put together a report suggesting that the merger does not present antitrust concerns even though the two firms each enjoy a 15 percent share ..
Test the null hypothesis that the population variance is equal to 93 against the alternative that the population variance is greater than 93. Use alpha = 0.05. A random sample of 100 with a mean of 60 and a standard deviation.
Major overhaul express of $5000 each are anticipated for a large piece of earthmoving equipment. The expenses will occur at EOY four and will continue every 3 years thereafter up to and including year 13. The interest rate is 12% per year.
Assume TC stands for Total Cost, TFC as Total Fixed Cost, TVC as Total Variable Cost, ATC as Average Total Cost, AFC as Average Fixed Cost, AVC as Average Variable Cost, and MC as Marginal Cost. Unit of Output TC TFC TVC ATC AFC AVC MC
Assume that a state government currently provides no child care subsidies to working single parents, but it now wants to adopt a plan that will encourage labor force participation among single parents. Suppose child care costs are hourly.
The coefficient of determination for a regression relationship defined through Y = a + bX is 81 percent.
Wilpen Corporation, a price-setting company, manufactures nearly 80% of all tennis balls purchased in the United States.
the manager of Burger Man - a firm that rents a spot to sell burgers at Easy University. Based on estimates provided by a consultant, burger demand (monthly) and cost functions for meals are Q= 2500-250P and C= 500+ 2Q (MC=2), respectively.
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