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Newspaper vending machines are designed so that once you have paid for one paper; you could take more than one paper at a time. But soda vending machines, once you have paid for one soda, dispense
For each of the following situations, decide whether the bundle Lakshani is thinking about consuming is optimal or not. If it is not optimal, how could Lakshani improve her overall level of utility.
What effort does the principal want to induce when effort is not observable. What is the optimal contract for the principal.
Is this rate of trade-off the same no matter how many apples are relinquished. Write down the algebraic equation for this person's budget constraint, and graph it showing the points mentioned in par
Given that the individual faces the prospect of gaining or losing an amount of wealth h with equal probability, determine the maximum insurance premium that the individual is prepared to pay. &nbs
calculate utility function that corresponds to a constant Arrow-Pratt measure of absolute risk-aversion. Here's a problem from Mas-Colell, Whinston and Green textbook on Microeconomic.
Is she buying the utility-maximizing combination of bread and milk. If not, how should she reallocate her expenditures between the two goods.
Which nation is likely to receive the most benefit from this increase in investment. Explain your answer.
Given the difficulties that the regulation of public utilities faces, would it not be better to nationalize public utilities, as some European countries have done. Explain."
Solve for the optimal choice. Graph this solution. How many hours of work is the consumer working. What is her income. Can you show me the steps needed to solve the this problem.
What is expected utility theory. On what assumptions is the theory based, and how plausible are these assumptions. Explain the Ellsberg paradox.
What does the agent choose if the terms are worse than actuarially fair. Show there are either one or two kinds of equilibrium in competitive insurance markets, depending on how equilibrium is defin
Determine the equilibrium outcome, or outcomes, when there are more sellers than buyers. What are the characteristics of the "market for lemons.
While effort is not observable, profits are. The firm is risk neutral and so maximizes expected profits net of wages. What would happen if there were full information.
What is the seller's expected profit when r=0. What value for r is optimal for the seller, and what then is the seller's expected profit.
Is she buying the utility-maximizing combination of bread and milk. if not how should she reallocate her expenditures between the two goods.
Why is water, which is so useful and so necessary, so cheap, when diamonds, which are so relatively unnecessary, are so expensive?" In modern economic terms, explain the water/diamond paradox. &nb
The agent has the von Neumann-Morgenstern utility function, u=lnx, where x is wealth. How much insurance should the agent buy. Show that a risk averse agent offered terms worse than actuarially fair w
Explain what it means that the preference relation has a utility function representation, and define the notion of a von Neumann-Morgenstern utility function.
Suppose p=15. What is the individual's optimal level consumption. What is his level of net satisfaction from this good.
What is the diminishing marginal concept. Is there a parallel between diminishing marginal utility in consumption and diminishing returns in production. Describe any similarities you see.
Why is it important that m>p1b. What is the interpretation of the coefficient b. Do the demand functions satisfy the relevant homogeneity conditions. Derive the indirect utility function v(p,w).
At what level of initial wealth will he be indifferent between taking on the risk of getting no income and buying the insurance that removes the risk.
axes are often used as a means of distributing income. What kind of tax system would you favor (regressive, flat, progressive).
how can rational thinking explain the above behaviors. How do your thoughts impact, if at all, your opinion of the theory.