There are four axioms that underpin Expected Utility Theory. Match the names of these axioms to the four descriptions below. Prompts If lottery A is preferred to lottery B; and lottery B is preferred to lottery C; then lottery A must be preferred to lottery C. For every pair of possible lotteries, A and B; either A is preferred to B, B is preferred to A, or A is valued indifferently to B. There is nothing so good (or so bad) that it does not become insignificant if it occurs with small enough probability. Submitted Answers Choose a match Choose a match Choose a match

There are four axioms that underpin Expected Utility Theory. Match the names of these axioms to the four descriptions below. Prompts If lottery A is preferred to lottery B; and lottery B is preferred to lottery C; then lottery A must be preferred to lottery C. For every pair of possible lotteries, A and B; either A is preferred to B, B is preferred to A, or A is valued indifferently to B. There is nothing so good (or so bad) that it does not become insignificant if it occurs with small enough probability. Submitted Answers Choose a match Choose a match Choose a match

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kimberly has $1,000 per year to spend between $50 concert tickets and $200 per night getaways. Her utility maximizing combination is 8 concerts and 3 overnight getaways. She recently received a promotion on her job and now she can spend up to $2000 per year on these two items. Her new utility maximizing combination will depend in part on what? Group of answer choices The substitution effect. The income effect. The degree to which concerts and overnight getaways are normal goods or inferior goods. The fact that concerts and getaways are fungible goods.
Suppose you get two job offers when you graduate. First offer is in LA and pays $6000 permonth. The price of food in LA is $3 and price of housing is $5. The second offer is in SanFrancisco and pays $10000. Both food and housing is more expensive in SF at PF = 4 and PH = 6respectively. If your utility function is U (F, H) = F1/4 H 3/4 which job offer should you accept?
Two friends, Karol and Manuel, like to drink kombucha (x₁) and matcha (x₂). Both X₁ and X2 are expressed in ounces. The following utility function represents Karol's preferences: 1 1 2 2 u (x1, x2) = x1 x3 The following utility function represents Manuel's preferences: u (x₁, x2) = √√x1 + x2 Karol's income in dollars is denoted by mk, and Manuel's income is denoted by mm. Both face the same prices in the market, denoted by p₁ and p2, for kombucha and matcha, respectively. Both prices are expressed in dollars per ounce. Assume p₂=1 throughout the whole question. 1) Draw Karol's and Manuel's indifference curves in separate graphs and describe any important similarities or differences between the two.
True or false. A change in prices or income can alter preferences and thus the indifference curves can shift.
Bob’s preferences for apples (A) and bananas (B) are represented by U(A,B)=A+2B. Apples cost £2 and bananas £1. Given that Bob’s monthly income is £30 answer the following questions:a) What type of goods are apples and bananas for Bob?b) What is the proportion to which Bob is willing to exchange apples for bananas?c) Illustrate and solve graphically Bob’s utility maximisation problem.d) If his income increases every month by £10, how will Bob’s consumption choice be affected? Illustrate graphically the income expansion path and the Engel curve for each good.e) How will an increase in the price of bananas to £6 affect Bob’s optimal consumption choice? (Bob’s income is £30)f) Graph Bob’s demand curve for each good.g) Assume that Bob wins a voucher of £20 redeemable only in apples. How would this affect Bob’s his utility? (Assume that prices and income are as described initially)h) Assume that Bob is presented with two options: an apples voucher of £20 or just £6 to spend in any good he…
Suppose Katie buys the bundle (20,9) from the budget line 3x_1 + 5x_2 = 105. When the price of good 1 changes to p1 = 6 and the price of good 2 remains the same, she buys the bundle (5,15). On a later date when p1 = 5 and p2 = 4, by observing Katie’s choices we can say that the Weak Axiom of Revealed Preference (WARP) is violated if a) She buys the bundle (10,15). b) She buys the bundle (15,10) c) She buys the bundle (23,6) d) She buys the bundle (25,25). e) None of the above choices violates WARP.