Amid growing concerns that a virus outbreak from Asia will turn to a global pandemic, Ivan the Investor is weighing his options of investing in energy markets, airlines/travel, or emerging technologies such as companies specializing in video conferencing. Ivan sees the near future as bringing one of three possibilities: the virus will be controlled and will not spread globally; there we will be a short term global pandemic that causes disruptions in the immediate future, but will then be controlled within 18–24 months; there will be a global pandemic that causes long-term disruptions for longer than two years. On the basis of past experience, the Ivan estimates the following rates of return (measured in annual interest rates) for each eventuality. Future Virus is Controlled Short-term Pandemic Long-term Pandemic Investor Energy Markets Travel 8% 5% 0% -5% 6% -5% -8% 10% Technology Sector 4%

Amid growing concerns that a virus outbreak from Asia will turn to a global pandemic, Ivan the Investor is weighing his options of investing in energy markets, airlines/travel, or emerging technologies such as companies specializing in video conferencing. Ivan sees the near future as bringing one of three possibilities: the virus will be controlled and will not spread globally; there we will be a short term global pandemic that causes disruptions in the immediate future, but will then be controlled within 18–24 months; there will be a global pandemic that causes long-term disruptions for longer than two years. On the basis of past experience, the Ivan estimates the following rates of return (measured in annual interest rates) for each eventuality. Future Virus is Controlled Short-term Pandemic Long-term Pandemic Investor Energy Markets Travel 8% 5% 0% -5% 6% -5% -8% 10% Technology Sector 4%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When a famous painting becomes available for sale, it is often known which museum or collector will be the likely winner. Yet, the auctioneer actively woos representatives of other museums that have no chance of winning to attend anyway. Suppose a piece of art has recently become available for sale and will be auctioned off to the highest bidder, with the winner paying an amount equal to the second highest bid. Assume that most collectors know that Valerie places a value of $15,000 on the art piece and that she values this art piece more than any other collector. Suppose that if no one else shows up, Valerie simply bids $15,000/2=$7,500 and wins the piece of art. The expected price paid by Valerie, with no other bidders present, is $________.. Suppose the owner of the artwork manages to recruit another bidder, Antonio, to the auction. Antonio is known to value the art piece at $12,000. The expected price paid by Valerie, given the presence of the second bidder Antonio, is $_______. .
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Time remaining: 01 :53 :32 Economics A dealer decides to sell an antique automobile by means of an English auction with a reservation price of $900. There are two bidders. The dealer believes that there are only three possible values, $7,200, $3,600, and $900, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue from selling the car is approximately Group of answer choices $3,600. $2,500. $3,900. $5,400. $7,200.
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