Apply the The Ricardian model of international trade to the following questions Suppose that the investor (whose name is Avril) is risk loving with utility-of-money function v (c) = c². Let p = 2, t =,= 1, t= 3 rb = and w = 10. 13 (a) What is Avrilís contingent consumption if x = 0? (b) What is Avrilís contingent consumption if x = 10? (Express the consumption level in each state as a fraction, not a decimal.) (c) Draw Avrilís budget constraint in a CC diagram. Be sure to ex-plain how you constructed your Ögure. (d) Show that Avril has the same expected utility at x = 10 and x = 0. Add an indifference curve to your diagram to illustrate this fact. | (e) Using your diagram, explain why Avril will choose x = 0 if the 5 tax rate increases above t = and will choose x = 10 if it 13 5 13 decreases below t =
Apply the The Ricardian model of international trade to the following questions Suppose that the investor (whose name is Avril) is risk loving with utility-of-money function v (c) = c². Let p = 2, t =,= 1, t= 3 rb = and w = 10. 13 (a) What is Avrilís contingent consumption if x = 0? (b) What is Avrilís contingent consumption if x = 10? (Express the consumption level in each state as a fraction, not a decimal.) (c) Draw Avrilís budget constraint in a CC diagram. Be sure to ex-plain how you constructed your Ögure. (d) Show that Avril has the same expected utility at x = 10 and x = 0. Add an indifference curve to your diagram to illustrate this fact. | (e) Using your diagram, explain why Avril will choose x = 0 if the 5 tax rate increases above t = and will choose x = 10 if it 13 5 13 decreases below t =
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Apply the The Ricardian model of international trade to the following questions
Suppose that the investor (whose name is Avril) is risk loving with
b = and
5
utility-of-money function v (c) = c². Let p = 2, t = 3,8 = 1, re
= ₁
13
(a) What is Avrilís contingent consumption if x = 0?
(b) What is Avrilís contingent consumption if x = 10? (Express the
consumption level in each state as a fraction, not a decimal.)
(c) Draw Avriliş budget constraint in a CC diagram. Be sure to ex-plain how you constructed
your Ögure.
(d) Show that Avril has the same expected utility at x = 10 and x = 0. Add an indifference
curve to your diagram to illustrate
this fact.
|
(e) Using your diagram, explain why Avril will choose x = 0 if the
5
tax rate increases above t = and will choose x = 10 if it
and w = 10.
decreases below t =
5
13](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F944142c0-9ef7-443d-ac16-a471a215da64%2Feec79521-811e-4099-b25d-8605afa0b223%2Fa1gct3_processed.png&w=3840&q=75)
Transcribed Image Text:Apply the The Ricardian model of international trade to the following questions
Suppose that the investor (whose name is Avril) is risk loving with
b = and
5
utility-of-money function v (c) = c². Let p = 2, t = 3,8 = 1, re
= ₁
13
(a) What is Avrilís contingent consumption if x = 0?
(b) What is Avrilís contingent consumption if x = 10? (Express the
consumption level in each state as a fraction, not a decimal.)
(c) Draw Avriliş budget constraint in a CC diagram. Be sure to ex-plain how you constructed
your Ögure.
(d) Show that Avril has the same expected utility at x = 10 and x = 0. Add an indifference
curve to your diagram to illustrate
this fact.
|
(e) Using your diagram, explain why Avril will choose x = 0 if the
5
tax rate increases above t = and will choose x = 10 if it
and w = 10.
decreases below t =
5
13
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