year (Year 1). Suppose the government knows that the undiscounted net nefits next year are $50. If the social discount rate is 5%, then the net benefits s year have to be less than $ for the policy to have a negative net present lue (round your final answer to two digits, e.g., 22.47 or 03.57, and be wary of =gative signs!).

year (Year 1). Suppose the government knows that the undiscounted net nefits next year are $50. If the social discount rate is 5%, then the net benefits s year have to be less than $ for the policy to have a negative net present lue (round your final answer to two digits, e.g., 22.47 or 03.57, and be wary of =gative signs!).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Jason Stilton is the chief executive officer of RightLiving a company that buys life insurance policies at a discount from terminally ill persons and sells the policies to investors for 85% of the value of the future benefit. The patients recieve the cash to use for medical and other expenses and the investors are guaranteed a positive return on thier investment. The diffreance between the purchace and sale prices is the RightLivinf Profit. Stilton is aware that some sick patients may obtain insurance policies through fraud (Not revealing thier illness on the insurance application). An insurance company that discovers such will cancel the policy and refuse to pay. Stilton beleives that most of the policies he has purchased are legitimate, but he knows some are probably not. Question Using IDDR approch, discuss the decision process Stilton should use in deciding whether to disclose the risk of fraudulent policies to potential investors.
Millicent’s utility function is U(w) = W0.5 , where W is her wealth. She owns a “pure water” producing firm that will be worth GH100 or 0 Ghana cedis next year with equal probability. a. Suppose her firm is the only asset she has. What is the lowest price at which she will agree to sell her pure water? (Hint: price=amount that will give her the same expected utility) b. Assume that she has GH200 safely stored under her mattress, find the new lowest price at which she will agree to sell her “pure water” producing firm c. From your answers in parts (a) and (b), what is the relationship between her wealth and her degree of risk aversion?
not sure hoe to go about this- can someone show answers?
(Use this information to answer qustion 13 - 16) Suppose a household solves the following two-period consumption-savings problem max u(c1) + Bu(c2) {C1,C2} s.t. aw Y1 - C1 C2Y2 = (1+r) a with u(c) = √c where c₁ is consumption at time 1, c2 is consumption at time 2, ₁ is houshold income at time 1, y2 is houshold income at time 2 and w is the initial wealth. Suppose the incomes of the household are $50 in time 1 and $210 in time 2. The initial wealth is $100, the discount factor is 0.975 and interest rate is 5%. Solve for the household's choice of C1. (a) 125.12 (b) 126.58 (c) 175.16 (d) 341.88
The consumer views present and future consumption as perfect complements and would like to consume equal amounts in both periods, i.e., . Suppose, however, that there is a credit market imperfection that prevents this consumer from borrowing at all, i.e., . a. Show the consumer's lifetime budget constraint and indifference curves on a diagram. Note that because the consumer prefers to purchase present and future consumption in equal amounts, the indifference curves will be kinked at. Note also that because the consumer cannot borrow, the budget constraint will be kinked at the consumer's initial endowment. Recall that the budget constraint is given by: Recall also that the consumer's endowment for each period can be expressed as: b. Calculate the consumer's optimal current-period and future-period consumption and optimal saving and show this in your diagram. Does the existence of the credit market imperfection affect the consumer's choices? Recall that savings is given by: c. Suppose…