Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that O both bear an opportunity cost since they could have done other things instead of see the movie. O both bear the same opportunity cost since they are doing the same thing. O the cost of going to the movie is greater for the one who had more choices to

Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that O both bear an opportunity cost since they could have done other things instead of see the movie. O both bear the same opportunity cost since they are doing the same thing. O the cost of going to the movie is greater for the one who had more choices to

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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19
An investor allocates $30,000 and $50,000 to two assets (A1 and A2). These assets generate 5% and -4.5% rate of returns, respectively. She allocates the remaining 50% of her portfolio to an asset (A3), which provides 4.5% rate of return. Calculate the portfolio's rate of return.
INV 1 4c You have invested in a portfolio of 60% in risky assets (Portfolio R) and 40% in T-bills. The risky portfolio is described below: E(rR)=12% σR =15% If R is the optimal risky portfolio, and your degree of risk aversion is A=3, is your weighting between the T-bills and portfolio R optimal for you?
**Practice** In order to alleviate their risks, they are considering a risk-sharing agreement. Carol would buy one CC and David would buy one DD. Six months from now, they would sell their coins, add up the total amount of money, and split it equally between them. Thus, if only one of the coins is successful, they would both still have some positive amount of money at the end. Assume that they can verify whether the other really made the investment. They know whether the investment is successful, since the price of the coin is public information, and they trust that the other will pay them as promised. Which of the following statements is accurate?A. They will not make that risk-sharing agreement.B. Carol is willing to take the risk-sharing agreement, but David is not.C. They may be willing to make that risk-sharing agreement, but it depends on information not given in the question.D. They will surely make the risk-sharing agreement.E. None of the statements above is correct.
Online sale Suppose a student is considering selling their used smartphone online. They can sell it now for $p or wait and sell it next month for a different price. If they wait, they will receive a random offer with an equal probability of being either $300 or $100. The student can only receive one offer and cannot sell the phone after the second month. 1. Calculate the expected price in the next month. 2. Suppose that the current price p is equal to 200. (a) Give a reason why selling today could be a good idea. (b) Give a reason why selling next month could be a good idea.
4) You are a financial professional working in a corporate loan department. A company named Mitch Hedberg Inc. (MH) comes to you for a loan. MH has debt from a previous loan (given by a different firm than yours) of 200. Your company analysts say that MH is likely to earn either 180, 240, or 300 this year - each with a probability of 1/3. MH wants you to lend them 100. MH could use this borrowed 100 to do either project X or project Y. Project X has a guaranteed return of 125 if the 100 is put there. Project Y may return either 0 or 210; each has probability of 1/2 and also costs 100 to do. a) Which project, X or Y, has the larger expected value? b) If you lend MH the 100, what will they do with the money? Why? Show your math. c) Should you lend MH the money or not? Show your math. d) Why did I choose the letters "MH" for this problem? What financial economic concept with initials "MH" is important in this problem?
Anh, Caitlin and Don are housemates saving up to buy a new treadmill for their home gym. Although the treadmill can only be used by one person at a time, the housemates never exercise together, and each person has ample opportunity to use the treadmill at a time of their convenience. The treadmill they are looking at costs $900 and they have agreed to purchase it. However, as part of their treadmill purchase, they have the option of buying additional gym accessories to complement the treadmill (e.g. weights, skipping ropes, etc.) valued at 167 dollars. If Anh values the additional accessories at 64 dollars and Caitlin values them at 42 dollars, how much must Don value them if the extra accessories are to be purchased? Answer to the nearest whole dollar figure (with no decimal points, spaces, S signs, or commas in your answer). QUESTION 5 Assume Country A is planning to build a virtual public library that will give all its citizens free access to books and journals. The project is…
2. Christiaan can go hiking, or he can stay at home. Hiking would be fun if nothing bad happens, but there is a risk if he goes hiking that he will meet a bear (not fun) or get bitten by a snake (very not fun). Christiaan decides that if there is a 5% chance of meeting a bear and a 1% chance of getting bitten by a snake, he would prefer to go hiking rather than stay at home. However, if the chance of meeting a bear is 10% and the chance of a snake bite is 5%, he definitely would rather stay at home. then (a) Consider the utility function: U (stay home) = 25, U (hike no event) = 100, U (hike & snake) -1000, U (hike & bear) = -200. Does this utility function represent Christiaan's pref- erences? Explain. (b) Suppose that the utility function in (a) does represent Christiaan's preferences. Would Christiaan prefer to hike or stay home if the probability of meeting a bear is 6% and the probability of being bitten by a snake is 4%? Show your work.
Nn3 Suppose an incumbent monopoly firm currently earns a profit of $50,000 per period. A potential entrant could enter and make a profit of $15,000 per period while also lowering the incumbent’s profit to $20,000 per period. The monopoly firm could seek to engage in predatory pricing, which would lead to both firms earning a loss of $5,000 per period. (a) Is there a Nash Equilibrium in this game? If so, what is it? (b) Discuss how this game might play out in the real world?
A couples house is $192,00 and their auto is $9,500. Assume that their home is now appraised at $200,000 and the value of their automobile has dropped to $8,700. Calculate and characterize the effects of these changes on their net worth.
[3%] 4. Consider the two-player game shown in the table below. Player 1 chooses between four possible strategies: A, B, C and D. Player 2 can choose among three possible strategies: a, b and c. In each cell of the table, the first number is the payoff for Player 1, the second number is the payoff for Player 2. Higher numbers represent higher payoffs. Player 2 a b C A 2,-2 4,0 -6,-2 B Player 1 4,-4 3,-3 9, 1 C 2,6 -1,4 6,4 D 6,2 0,4 -9,0 (a) Simplify the game as far as possible using the iterated deletion of strictly dominated strategies. Clearly explain the steps of your reasoning. [2%] (b) Identify any pure strategy Nash equilibria of the simplified game derived in part (a). [1%] (c) Identify any mixed strategy Nash equilibria of the simplified game derived in part (a). Write down the best response function for each player. Draw these functions Page 3 of 5
Three players (player 1, player 2 and player 3) each chooses a positive integer QE {1, 2, 3, . 100}. If all three players choose the same integer Q, each player gets $100/3. If all three players choose different integers, the player with the largest integer gets $100, and the two other players get $0. If two players choose the same integer Q, and the third player chooses a different integer Q', then the player playing Q' gets $0, and the two players who played Q get $50 each. Find 2 Nash equilibriums in this game. ....