Question 3The lottery is a fair gamble.TrueFalseNot enough information to draw a conclusionQuestion 4tThe expected monetary value of the lottery is-50Ooillustrated by Point Aillustrated by Point Billustrated by Point Cillustrated by Point DNone of the above.Question 5The expected utility of the lottery to George isillustrated by Point Eillustrated by Point FO illustrated by Point Gillustrated by Point HNone of the above. George faces the following lottery. He may lose 500 with a probability of 4/9, andwin 400 the rest of the time. The graph below illustrates his preference overdifferent monetary outcome. To help you, all lines and points are color-coordinated.U(M)32EFGHН0-500オーエイатаA B -50 0CD 400M

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Answered: Question 3 The lottery is a fair gamble…

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Economics

Question 3 The lottery is a fair gamble Ⓒ True O False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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10. Which lottery payout scheme is better? Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum payout, you get $3,000 today. If you pick the payments over time payout, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today. At an interest rate of 6% per year, you would be better off accepting the At an interest rate of 8% per year, you would be better off accepting the It will depend on the interest rate; advise her to get a calculator. lump sum The lump sum payout is always better. The payments over time payout is always better. None of these answers is good advice. payout since it has the greater present value. payments over time Years after you win the lottery, a friend in another country calls to ask your auvice. Dy wild comcidence, she has just won another lottery with the same payout schemes. She must make a quick…
You are a crude oil dealer. You intend to sell 50,000 barrels of crude oil in December. Each contract calls for delivery of 2,000 barrels of oil. Current futures price of one barrel of crude oil is $70. You believe that there are only four possible oil prices in December which are $50, $60, $70, and $80.i. Explain what action you would take to protect from changes in oil prices in December. Provide reasons for your action.ii. Calculate the total proceeds (sales proceeds plus loss or profit from futures contracts) for each of the possible price in December.
3. Which lottery payout scheme is better? Suppose you win a raffle held at a neighborhood elementary school fundraiser and are given the choice between two different ways to be paid. You can either accept the money in a lump sum immediately or in a series of payments over time. If you choose the lump sum payout, you receive $3,000 today. If you choose to collect payments over time, you receive three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today At an interest rate of 6% per year, the winner would be better off accepting the value. since that choice has the greater present At an interest rate of 10% per year, the winner would be better off accepting A couple years after you win the raffle, you and your friend are back at the same event. This time, your friend gets lucky and wins the contest, and you both realize the payout schemes are the same as they were back when you won. They now face the decision between collecting their prize as a lump sum or as a…
BNQ12.1 Case: Consider a Lottery with 3 Possible Outcomes: ▪ $125 will be received with Probability 0.2 $100 will be received with Probability 0.3 $50 will be received with Probability 0.5 ■ ▪ Question: What is the Expected Value of the Lottery?
7. Individual Problems 19-6 You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as follows, but you can't distinguish among them: Employee Value Probability $30,000 0.1 $49,000 0.1 $68,000 0.1 $87,000 0.1 $106,000 0.1 $125,000 0.1 $144,000 0.1 $163,000 0.1 $182,000 0.1 $201,000 0.1 The expected value of hiring one employee is $ $68,000 Suppose you set the salary of the position equal to the expected value of an employee. Assume that em employee value. not work for a salary below their $49,000 $30,000 The expected value of an employee who would apply for the position, at this salary, is $ Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is $87,000
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Micro Question 1 Please help to solve this. Thank you
please only do: if you can teach explain steps of how to solve parts after c)
A risk-averse investor will: a. Always accept a greater risk with a greater expected return b. Only invest in assets providing certain returns c. Sometimes accept a lower expected return if it means less ri d. Never accept lower risk if it means accepting a lower expected return
B: Theory: Choice under uncertainty 3. Nigel would be (just) willing to pay £5 for a bet giving 50% chance of £20 and 50% chance of nothing. What is the expected value of this bet? 4. Represent Nigel's preferences in a suitably labelled graph. 5. A company offers Nigel full insurance, so that in the 'bad' state of the world it will give him a pay out of £20. If the company makes zero profits, what should premium should the company charge? Would Nigel take the insurance? (explain)