Angel, Bianca, Clara are independent farmers, and they are deciding which crop to cultivate. They usually select tomatoes because it makes $100 in profits with a probability of 100%. A foreigner just visited them and told them they can crop this new vegetable called amaranta. However, it only grows half the time. If someone grows it, they will make $500 in profits with a probability of 50% and $0 with a probability of 50%. The foreigner sells the amaranta seeds at p. But, since she wants to promote amaranta worldwide, she will only charge the seeds if the amaranta grows. In other words, if Angel, Bianca or Clara cultivate amaranta, they will mak $500 - p in profits with a probability of 50% and $0 with a probability of 50%. Assume Angel, Bianca and Clara can only grow either tomatoes or amaranta, but not both at the same time. 10.3 w?, for which value of p is she indifferent If the utility function of Clara with respect to money is Uc = between growing tomatoes and amaranta?

Angel, Bianca, Clara are independent farmers, and they are deciding which crop to cultivate. They usually select tomatoes because it makes $100 in profits with a probability of 100%. A foreigner just visited them and told them they can crop this new vegetable called amaranta. However, it only grows half the time. If someone grows it, they will make $500 in profits with a probability of 50% and $0 with a probability of 50%. The foreigner sells the amaranta seeds at p. But, since she wants to promote amaranta worldwide, she will only charge the seeds if the amaranta grows. In other words, if Angel, Bianca or Clara cultivate amaranta, they will mak $500 - p in profits with a probability of 50% and $0 with a probability of 50%. Assume Angel, Bianca and Clara can only grow either tomatoes or amaranta, but not both at the same time. 10.3 w?, for which value of p is she indifferent If the utility function of Clara with respect to money is Uc = between growing tomatoes and amaranta?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.3P

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