A farmer faces the following uncertainty and his utility function is U(x)=√x: Choose the incorrect statement. State of Nature OO Bad year Average year Good year OO Profits 0 100 Great year O The farmer's risk premium is larger than 90. The farmer is a risk-averse player. O His expected profit is larger than $220. His expected utility is larger than 12. O If an insurance company offers a plan of $80, the farmer is willing to buy it. 400 900 Probability 20% 40% 30% 10%

Johnny is "paid" by his parents $2o if he gets a grade A, $10 if he gets a grade B, whereas he has to pay his parents back $5 if he gets a grade other than A or B. On average 20% of the grades he gets are A, and 30% are grades B. What is the expected value of what he "earns" per grade ? What is the expected value of what he "earns" at school weekly if on average he gets five grades a week ? How long should Jim save until he collects enough money to buy a pair of brand new Hi-Fi headphones that cost $225?

Suppose Grace and Lisa are to go to dinner. Lisa is visiting Grace from outof town, and they are to meet at a local restaurant. When Lisa lived in town,they had two favorite restaurants: Bel Loc Diner and the Corner Stable. Ofcourse, Lisa’s information is out of date, but Grace knows which is betterthese days. Assume that the probability that the Bel Loc Diner is better isp > 1/2 and the probability that the Corner Stable is better is 1 - p. Naturedetermines which restaurant Grace thinks is better. Grace then sends amessage to Lisa, either “Let’s go to the Bel Loc Diner,” “Let’s go to theCorner Stable,” or “I don’t know [which is better].” Lisa receives the message, and then Grace and Lisa simultaneously decide which restaurant to go to. Payoffs are such that Grace and Lisa want to go to the same restaurant, but they prefer it to be the one that Grace thinks is better. More specifically, if, in fact, the Bel Loc Diner is better, then the payoffs from theiractions are as shown in the…

1. A woman with current wealth X has the opportunity to bet an amount on the o ccurrence of an event that she knows will occur with probability P. If she wager s W, she will received 2W, if the event occur and if it does not. Assume that t he Bernoulli utility function takes the form u(x) = -e-TX with r> 0. How much should she wager? Does her utility function exhibit CARA, DARA, IARA?

Utility Theory You live in an area that has a possibility of incurring a massive earthquake, so you are considering buyingearthquake insurance on your home at an annual cost of $180. The probability of an earthquake damagingyour home during one year is 0.001. If this happens, you estimate that the cost of the damage (fully coveredby earthquake insurance) will be $160,000. Your total assets (including your home) are worth $250,000. A. Apply Bayes’ decision rule to determine which alternative (take the insurance or not) maximizes yourexpected assets after one year.

Question 2    . Full explain this question and text typing work only

please  only do: if you can teach explain steps of how to solve each part what is the optimizatio  formula to use for foc?  please solve

Becky is deciding whether to purchase an insurance for her home againtst burglary. the payoff for her is shown as follow: Net worth of her Net worth of her home: $ 20000 burglary(10%) Net worth of her Net worth of her home: $50000 burglary (90%) The insueance would cover all the loss from burlary and the insurance fee is $8000. Her utility funtion is given as u=w ^0.3 Should Beck purchase the insurance Explain.

A6

please teach  explain step by step,