EBK MICROECONOMICS
EBK MICROECONOMICS
2nd Edition
ISBN: 9780134458496
Author: List
Publisher: VST
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Chapter 2, Problem 5P
To determine

Direction and reasoning of causality in the following cases:

(a) If the number of police force rises with a simultaneous decline in the crime rates and if higher crime rates lead to a higher number of the police force.

(b) If a nation who wants to win a Nobel prize could eat more chocolate when there is a strong positive correlation between Nobel prize-winning and chocolate consumption.

(c) When the muscles mass and strength between the elders who live independently are lower than the elderly athletes who exercise regularly and live a healthier life.

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1. A town relies on four different sources for its non-drinking water needs: dam water, reclaimed water, rain water, and desalinated water. The different sources carry different risks and costs. For instance, desalinated water is fully reliable due to abundant sea water, but it is more expensive than other options. Reclaimed water also has relatively lower risk than rain or dam water since a certain amount can be obtained, even during the dry. season, by the treatment of daily generated waste water. Using any of the four options requires an investment in that resource. The return on a particular water source is defined as the amount of water generated by the source per dollar of investment in it. The expected returns and standard deviations of those returns for the four water sources are described in the following table: Water resource Expected return St. Deviation Dam water 2.7481 0.2732 Reclaimed water 1.6005 0.0330 Rain water 0.5477 0.2865 Desalinated water 0.3277 0.0000 Higher…
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