**Practice**For each of the individuals, what is the expected utility of buying their preferred coin?A. 4B. 2C. √2D. √1.1E. 1 Carol is obsessed about a new cryptocurrency called Cr4zYCrypto, which we will refer to asCC. Her friend David is obsessed about another one called D15cr33tD0114rz, which we will referas DD. Both Carol and David have a starting wealth wo = $110,000. Each of the coins is pricedat exactly $110,000 right now, so they're considering using all of their wealth to buy one of theirpreferred coins each. It is impossible to buy a fraction of either CC or DD; it is either buy oneunit or nothing. They both expect that, with 50% probability, they will be able to sell their coinsfor $400,000 in just 6 months. But with 50% probability, the value will go to zero and they loseall their money. Their instantaneous utility isWu(W) ==100000'where W is final wealth.Some values you may find useful: √1 = 1, √1.1 ≈ 1.05, √√2 ≈ 1.4, √√4 = 2

The correct answer is:E. 1Explanation:Given,the instantaneous utility function: u(W)=100000WThe…

Answered: Carol is obsessed about a new…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1
those determinations. Respond to the following questions in a minimum of 175 words: . Consider a situation that you might need to use your understanding of probability to make an informed decision. • What sorts of information would you collect? • How might you use what you have learned about probability to determine a course of action? What are the possible benefits and limitations of this approach? Due Monday Reply to at least 2 of your classmates. Be constructive and professional in your responses. Copyright 2020 by University of Phoenix. All rights reserved. New Group 1 17 Responses 33 Replies
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1. Mr. Smith can cause an accident, which entails a monetary loss of $1000 to Ms. Adams. The likelihood of the accident depends on the precaution decisions by both individuals. Specifically, each individual can choose either "low" or "high" precaution, with the low precaution requiring no cost and the high precaution requiring the effort cost of $200 to the individual who chooses the high precaution. The following table describes the probability of an accident for each combination of the precaution choices by the two individuals. Adams chooses low precaution Adams chooses high precaution Smith chooses low precaution Smith chooses high precaution 0.8 0.5 0.7 0.1 1) What is the socially efficient outcome? For each of the following tort rules, (i) construct a table describing the individuals' payoffs under different precaution pairs and (ii) find the equilibrium precaution choices by the individuals. 2) a) No liability b) Strict liability (with full compensation) c) Negligence rule (with…
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