lanet's broad attitude to risk (risk averse, risk neutral, or risk loving) is independent of her wealth. She has initial wealth w and is offered the Opportunity to buy a lottery ticket. If she buys it, her final wealth will be either w + 4 or w – 2, each equally likely. She is indifferent between puying the ticket and not buying it. Janet offers her friend Sam (who has identical preferences and initial wealth) the following proposition: hey buy the ticket together, and share the cost and proceeds equally. Sam has another idea: They buy two tickets (that have independent outcomes) and share the costs and proceeds equally. Suppose that Janet's and Sam's utility of income is given by u(z) = In z and the initla wealth of each one of them is equal to w = 4. Vhich of the following statements is true? O a. Both agents prefer Sam's solutions to Janet's solution. O b. Both agents prefer Janet's solutions to Sam's solution. The agents are indifferent between Janet's solutions to Sam's solution.

Janet’s broad attitude to risk (risk averse, risk neutral, or risk loving) is independent of her wealth. She has initial wealth ?w and is offered the opportunity to buy a lottery ticket. If she buys it, her final wealth will be either w+4 or w−2, each equally likely. She is indifferent between buying the ticket and not buying it. Janet offers her friend Sam (who has identical preferences and initial wealth) the following proposition: They buy the ticket together, and share the cost and proceeds equally. Sam has another idea: They buy two tickets (that have independent outcomes) and share the costs and proceeds equally. Which of the following statements is true? a. There are risk averse expected utility maximisers who would prefer Janet's idea to Sam's idea. b. Any expected utility maximiser whose utility is a strictly increasing function of wealth would prefer Sam's idea to Janet's idea. c. Any risk averse expected utility maximiser would prefer Sam's idea to Janet's idea.…

Janet’s broad attitude to risk (risk averse, risk neutral, or risk loving) is independent of her wealth. She has initial wealth w and is offered the opportunity to buy a lottery ticket. If she buys it, her final wealth will be either w+4 or w−2, each equally likely. She is indifferent between buying the ticket and not buying it. Which of the following statements is true? Select one: a. Janet is risk averse. b. Janet is risk loving. c. Janet is risk neutral. d. There is not enough information to determine Janet's risk attitude.

Janet's broad attitude to risk (risk averse, risk neutral, or risk loving) is independent of her wealth. She has initial wealth w and is offered the opportunity to buy a lottery ticket. If she buys it, her final wealth will be either w + 4 or w – 2, each equally likely. She is indifferent between buying the ticket and not buying it.

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The value of a successful project is $420,000; the probabilities of success are 1/2 with good supervision and 1/4 without. The manager is risk neutral, not risk averse as in the text, so his expected utility equals his expected income minus his disutility of effort. He can get other jobs paying $90,000, and his disutility for exerting the extra effort for good supervision on your project is $100,000. (a) Show that inducing high effort would require the firm to offer a compensation scheme with a negative base salary; that is, if the project fails, the manager pays the firm an amount stipulated in the scheme. (b) How might a negative base salary be implemented in reality? (c) Show that if a negative base salary is not feasible, then the firm does better to settle for the low-pay, low-effort situation.

Any risk-averse individual would always (Select all that applies) a) take a 30% chance at $100 rather than a sure $20. b) take a sure $20 rather than a 30% chance at $100. c) take a sure $2 rather than a 50% chance at $5 and a 50% chance at losing $1. d) take a 50% chance at $5 and a 50% chance at losing $1 rather than a sure $1.

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Economics Fenner Smith from Workouts 13.2 is an investor who has preferences for risk o and returnu given by the utility function u = min (µ, 4 –0). He plans to invest $40,000. The market rate of return is 8 percent and the risk-free rate of return is 2 percent. The risk on the market portfolio is 2 percent. a. How much of his $40,000 will a utility maximizing investor hold in the market portfolio? Show this as Bundle A in your diagram. b. The market return rises to 16 percent.How much of his $40,000 will he hold in the market portfolio. Show this as Bundle C in your diagram. c. Calculate the Hicksian ČV for this change. Show this in your diagram as Bundle B.

Janet’s broad attitude to risk (risk averse, risk neutral, or risk loving) is independent of her wealth. She has initial wealth w and is offered the opportunity to buy a lottery ticket. If she buys it, her final wealth will be either w+4 or w−2, each equally likely. She is indifferent between buying the ticket and not buying it. Janet offers her friend Sam (who has identical preferences and initial wealth) the following proposition: They buy the ticket together, and share the cost and proceeds equally.  Sam has another idea: They buy two tickets (that have independent outcomes) and share the costs and proceeds equally.    Suppose that Janet's and Sam's utility of income is given by u(x)=ln⁡x and the initIal wealth of each one of them is equal to w=4. Recall the proposal made by Janet, and the solution put forward by Sam.   Which of the following statements is true? a. Both agents prefer Sam's solutions to Janet's solution. b. Both agents prefer Janet's solutions to Sam's solution.…