Consider two friends Anna and Elsa whose gains and losses are listed as follows: Anna's investment is worth $2.5 million (decreased from $3.5 to $2.5 million) Elsa's investment is worth $2.2 million (increased from $2 to $2.2 million) For each of them write down the reference utility function (First determine the reference point (use a parameter) and derive reference utility function for each).
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- Two students go out to lunch and decide to split the bill evenly between them. Each student has a quasi-linear utility function given by ui(fi , xi) = φi(fi) + xi , where φi(·) is strictly concave, fi is the amount of food consumed by student i, and xi is a composite numeraire good. Each student has a fixed budget of mi . EVALUATE THIS CLAIM: Both students eat too much!Clarice has a utility function: U(Y) = 1000 - (100/Y), where Y is her income. clarice has just graduated from college and has a career choice for her first job of either working as a teacher and earning $40,000 or trying to become a theatre lighting director and earning $70,000 (if there is growth in the demand for theatre) or $20,000 (if there isn't growth in the demand for theatre). there is a 50% probability of growth. a consulting firm guarantees Clarice that it already knows whether there will be growth in the demand for theatre next year. what is the maximum amount Clarice should be willing to pay for this information?A pirate is about to set sail on a 2-period journey (trip). He has 100 bags of barley (food). He must decide how much to consume in period 1 and how much to consume in period 2: (C1, c2). He gets all the barley in period 1 and none in period 2. Unfortunately, rats will eat 50% of any barley that he saves to consume in period 2. If the pirate's utility function is U(C1, C2) = C1C2, what levels of consumption does he choose in each period? (Hint: The "price" of barley in each period can be assumed to be 1.)
- Jerry's utility function is U(x,y) = ( 5x + y ) 18. Find Jerry's MRS (for good X in terms of good Y) and then find the value of the derivative dMRS/dx at the point were x=39 and y=69 and enter it below. Remember to enter the number in decimal form. If the number is negative, then use the negative sign (e.g., -3.29839).Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky the room is. It varies from s=0, where there is no smoke in the room, to s=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is. Person A's utility function is UA(XA,S)=XA+In(1+s), where xA is the amount of money Person A owns. Person B's utility function is uB(XB,1s)%3D3XB+2(1-s), where Xg is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Persch B has the legal right to a smoke-free room and there is a market for "emission right." At the Walrasian equilibrium, what will be the (per unit of smoke index) price p of the emission rights if the price of money is 1? O a. None of the other answers. O b. p=2/3 O c. p=1 O d. p=3/2 О е. р31/6Victoria founded a start-up several years ago, together with her Macedonian friends. At first, she was fairly poor and therefore very afraid of taking risks. Any negative shock could send the company into bankruptcy. Nowadays her business is thriving, stretching across several markets from Europe to Asia. Victoria no longer worries about taking monetary risks. In fact she enjoys a good gamble over horse races from time to time. How would you draw Victoria's utility function in a way that describes her changing taste for risk as her wealth increased? Please draw a graph and comment. Please do fast ASAP fast
- Bread and doughnuts: The consumer receives positive benefits from the consumption of beans (B) and donuts (K). Utility function of the consumer is the following: U(B,K) = 100∙B0.25 · K0.75 The price of beans (can) is ISK 2,000. but the price of a donut (box) is ISK 4,000. Consumption restrictions are placed on the consumer since his income is ISK 400,000. Put on all form donuts on the x-axis and beans on the y-axis. a) Show an equation for the bean's success rate for a single donut in light of the utility function. Draw the equivalence curve on a picture and explain what the equation is performance ratio is stated at each point on the equivalence curve. Explain with the concept of the efficiency ratio of the curvature of the equivalent curve. b) Find the most efficient consumption combination and draw on the diagram. c) The government decides to support the consumption of beans so its price drops to 1,000. Who is the most economical consumption combination based on the changed price…A consumer with $120 income and the utility function u(x,y) = (x^2)y where x is food and y clothing can go for shopping in one of the two stores A or B, where the prices for food and clothing are respectively pAx = 1, PAy = 80 and PBx = 8, PBy = 1. (a) If she can visit only one of the stores, which one would she go and what would be her optimal bundle there? Could she afford this very bundle at the other store? (HINT: How happy would she be if she chooses to go to store A for shopping? To store B? Which one is higher and what bundle would she buy there?) (b) If she can freely visit both stores (so that she buys each good from the store where it is sold cheaper), what would be her optimal bundle? What would she buy from each store? (c) How much money would she be willing to give up (out of her $120 budget) for the ability to visit both stores as in (b) rather than being restricted to shopping in only one store (the one she chooses in (a)? (HINT: suppose she pays $A for this privilege.…Vhee Ayar lives alone in a computer lab where it spends 10 hours per day producing spurious orside calls (denoted xf) and awarding incomprehensible penalties (denoted xp). Vhee Ayar can conjure 8 offside calls per hour, and it can summon 6 penalties per hour. The utility that Vhee Ayar derives from offside calls and penalties is captured by the utility function U(Xf, xp) = 3xf x05. How many offside calls and penalty kicks will Vhee Ayar choose to produce/consume each day?
- Persons A and B are roommates. Person A smokes and Person B does not. The index s measures how smoky the room is. It varies from s=0, when there is no smoke in the room, to s=1, when the room is filled with smoke. Thus, 1-s measures how "clean" the air in the room is. Person A's utility function is ua(XA,s)=Xa.S, where xA is the amount of money Person A owns. Person B's utility function is ug(xg, 1s)=Xg .(1-s)³, where xg is the amount of money Person B owns. Each person starts with an endowment of 5 units of money. Person A has the legal right to a fill up the room with smoke and there exists a market for smoke "abatements". At the Walrasian equilibrium, how much money will person B be left with? а. Хв31.25 ОБ. Хв32.25 O c. XB=0.25 O d. Xg=0.25 е. None of the other answers.Economics Anna's investment is worth $2.5 million (decreased from $3.5 to $2.5 million) Elsa's investment is worth $2.2 million (increased from $2 to $2.2 million) For each of them write down the reference utility function (First determine the reference point (use a parameter) and derive reference utility function for each).Please refer to the following information to answer the question (in bold) below: You enjoy consuming apples (A) and oranges (O). Suppose that your utility function over both goods is given by . Your marginal utility function for apples is Your marginal utility function for oranges is O You utility increases due to the price change U (A, 0) = AO³ You utility decreases due to the price change MUA = 0³ . Currently, the price of apples is $10/peck, the price of oranges is $5/pound, and your income is $160. Assume that apples are your horizontal axis good and oranges are your vertical axis good. Let's say the price of oranges rises to $10/pound of oranges. Comparing the utility you receive from your old consumer equilibrium bundle to your new consumer equilibrium bundle, how does the increase in the price of oranges impact your level of satisfaction as a consumer? MUO = 340² ЗАО2 You utility is unaffected by the price change You utility could either rise or fall due to the price change