Q1. A farmer believes there is a 50-50 chance that the next growing season will be abnormally rainy. His expected utility function has the form Expected utility = 0.5lnYNR + 0.5lnYR Where  and  represent the farmers income in the state of ‘normal rain’ and ‘rainy’ respectively. Suppose the farmer must choose between two crops that promise the following income prospects Crop YNR YR Wheat $83,000 $10,000 Maize $83,000 $15000 What mix of wheat and maize would provide maximum expected utility to this farmer?

Q: Generally speaking the demand for a good will be more inelastic if the good is very specific and…

A: The Demand is considered inelastic when due to change in price, the quantity doesn't changes much.…

Q: A tax expenditure is a. revenue forgone through special provisions in the tax code. b. the hidden…

A: Tax Expenditures refers to the statutory provisions that decreases the revenue and created…

Q: Economics Shawn's consumption is subject to risk. With probability 0.75 he will enjoy 10000 in…

A: Utility function = C1/2

Q: 3. Demeter has 100 acres of land on which she can plant wheat or rice. The following table shows the…

A: The producer has 100 acres of land. The income for each type of good is given as…

Q: Lela must decide to go on a winter trip to norway with the hope of seeing northern light  would…

A: The answer is b. 1,050.Here's how to calculate Lela's expected utility:Identify the possible…

Q: 35. Your current disposable income is $10,000. There is a 10% chance you will get in a serious car…

A: Current disposable income is $10,000.There is 10% chance you will get in a car accident, incurring…

Q: Gary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary's boat…

A: Not taking the gamble gives the $80 as an utility to gary.

Q: 2. Alice maximizes expected utility with an index u(x) √x where x is the total annual income. Her…

A: In certainty equivalence the preference of the consumer is an assured amount rather a higher return…

Q: 5. Consider a weather forecaster who is paid based on her performance. Each day, she forecasts the…

A: The act of forecasting requires coming up with forecasts that are based on both past and present…

Q: The expected value of project Red is

A: Expected value of a variable is defined as the predicted value of the variable. It is calculated by…

Q: 6. Are the following utility functions consistent with the axioms of the expected utility theorem?…

A: the utility function measures the welfare or satisfaction of a consumer as a function of the…

Q: Now, imagine that Port Chester decides to crack down on motorists who park illegally by increasing…

A: The opportunity cost is time spent evaluating and that money to spend on something else. A farmer…

Q: Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with…

A: The Von Neumann-Morgenstern (VNM) utility index is an index that measures an individual's preference…

Q: A farmer can grow wheat, or potatoes, or both. If the weat her is good, an acre of land yields a…

A: The expected payoff of the choice is the weightage average of all possible payoffs using the…

Q: Jones has a utility function u = m0.5. His initial wealth is mo 1000. He is considering Mr. to…

A: The expected value (EV), which is often referred to as mean value, is a metric that is used to…

Q: 2. Alice believes that her car would cost £12500 to replace if it was stolen or damaged. Based on…

A: The cost of car is The probability of the car being stolen or damaged is 15%. The user has in the…

Q: 2. A consumer has utility function for wealth U(W) = Ws, wealth W $1,000, and faces a 50% chance of…

A: Utility function for wealth: U(W) = W1/3 --------------------- W is wealth. ---------------------…

Q: John is deciding whether to exert effort (e = 1) to avoid an accident at work or not exert any…

A: Given information Utility of money=I0.5 Total utility=I0.5-c(e) e=1 when exert effort at work and…

Q: You are considering two options for your next family vacation. You can visit Disney World or…

A: Here we are given consumer's utility under the uncertain situations. Here consumer will make his…

Q: 13. In a dice game, the player rolls a single die. The payouts for a dice game are given below: roll…

A: Answer: Given, Let us first find the probabilities of all the outcomes: P1,2=26=13P3,4,5=36=12P6=16…