My current wealth is $1000 and I have exponential utility with a=0.001. There is a 4% chance that my basement will start leaking next week, in which case I will have to spend $400 to fix the problem. I am offered an insurance contract that costs c today, and will pay for any future repairs in the event it does start leaking. (a) What is my utility if I do not purchase the insurance and my roof does not leak? u(1000) v utiles. (b) What is my utility if I do not purchase the insurance and my roof does leak? u(600) v utiles. (c) What is my utility if I purchase the insurance? u(1000-c) utiles.

My current wealth is $1000 and I have exponential utility with a=0.001. There is a 4% chance that my basement will start leaking next week, in which case I will have to spend $400 to fix the problem. I am offered an insurance contract that costs c today, and will pay for any future repairs in the event it does start leaking. (a) What is my utility if I do not purchase the insurance and my roof does not leak? u(1000) v utiles. (b) What is my utility if I do not purchase the insurance and my roof does leak? u(600) v utiles. (c) What is my utility if I purchase the insurance? u(1000-c) utiles.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar like to listen to rock‐n‐roll music, and they love live bands. If the bar owner brings bands in to play music on a Saturday night, she will make a lot of money. However there are tenants in this building who get annoyed by the loud music. The benefits/costs to the owner/tenants of having zero, one, two or three bands on a Saturday night are listed below. Assume the bar owner has the right to hire as many bands as she likes. Iftransaction costs were $90, split between the bar owner and the tenants, how manybands would play? What would social welfare be? A. Three bands would play and social welfare would be ‐100.B. Two bands would play and social welfare would be 75.C. Two bands would play and social welfare would be ‐15.D. No bands would play and social welfare would be 0.E. Three bands would play and social welfare would be ‐190
There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar like to listen to rock‐n‐roll music, and they love live bands. If the bar owner brings bands in to play music on a Saturday night, she will make a lot of money. However there are tenants in this building who get annoyed by the loud music. The benefits/costs to the owner/tenants of having zero, one, two or three bands on a Saturday night are listed below. If the tenants have the right to be free of loud music enforced through aproperty rule, how many bands will play in Rock‐n‐Roll Bar on a Saturday night? A. ZeroB. OneC. TwoD. ThreeE. It depends on transaction costs
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Exercise: 01 Issue a promissory note: ⑴Amount ￡3,026.00 ⑵Date and place of issue 8/August/2009，Guangzhou, China ⑶Tenor At 90 days after date ⑷Maker Guangdong Imp. & Exp. Co., Guangzhou ⑸Payee Chemicals Import & Export Company London ⑴Drawer Thames Enterprises Ltd., London ⑵Drawee The National Westminster Bank Ltd., London ⑶Payee Philips Hong Kong ⑷Date and place of issue 07/01/2001，London ⑸Amount GBP79,014 Exercise: 02 Issue a check:
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