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- Heterogeneity in an endowment economy Suppose we have two typesof households: A and B. The utility maximization problem for a consumerof type i is max InCi,t+β ln Ci,t+1 Ct,Ct+1subject to Ci,t +Ci,t+1/ 1 + rt = Yi,t + Yi,t+1 / 1 + rt Note that the A and B households have the same discount rate and the same utility function. The only thing that is possibly different is their endowments. 1, Write down the Euler equation for households A and B.1) John is operating an internation business in the United Stateds of American and is focused on the limitation or short-term impact of an issue. It can be said that John has a ............. 2) The grestest good for the greatest number of persons is known as the ............... approach. 3) this theorgy states that a country's wealth was deternmined by the amount of its gold and silver holding. It is ...........?Please no written by hand solutions Social Security is the largest source of retirement income for most Americans. Project 2 provides you with an overview of the social security benefits for a couple. Four claiming scenarios are considered: ⚫ receiving benefit early at age 62; receiving full benefit at age 67; ⚫ delaying benefits until age 70; 心 one person takes full benefits at age 67, and the other person receive spouse benefits and switches to delayed benefit at age 70. After analyzing the scenarios, find the optimal social security claiming decision for the couple.
- Suppose you earn $50,000 per year and pay taxes based on marginal tax rates. The first tax bracket, which taxes at 5 percent, ranges from $0 to $25,000. The second tax bracket, which taxes at 25 percent, ranges from $25,001 to $100,000. How much will you pay in total taxes? Instructions: Enter your answer as a whole number.-Ben has named Jerry as primary beneficiary of Ben's life insurance policy and Tom as the contingent beneficiary. In which of the following ways do the rights of Jerry differ from the rights of Tom? - -If Jerry is living when Ben dies, Tom has no legal right to any of the life insurance lump-sum death proceeds. -The only circumstances under which Tom would have any legal right to the lump-sum death proceeds would be if Jerry predeceases Ben. -a.1 Only -b.2 Only -c.Both 1 and 2Suppose the administration of a University that is located a high-crime urban area mustdecide on a policy to increase policing on its campus. The student population is 10,500 students but iscould increase if crime is reduced. The cost of added policing in terms of additional salary and equipmentis estimated to be $2.4 million per year. Suppose the administration plans to make their decision with thehelp of a benefit cost analysis of the policy. VSL is $11.8 million a. Explain how the concept of Value of a Statistical Life might factor into a benefit cost analysis of thispolicy. b. How many lives would need to be save to justify the added policing costs if only prevented deathswere considered as the policy benefit? c. Suppose it is believed that student enrollment will increase in the future if crime on campus is reduced.Write a formula to calculate the present value of benefits of policing if student enrollment increases by4% each year.
- Question 3 Consider a medieval Italian merchant who is a risk averse expected utility maximiser. Their wealth will be equal to y if their ship returns safely from Asia loaded with the finest silk. If the ship sinks, their income will be y − L. The chance of a safe return is 50%. (i) Draw and carefully label the merchant’s endowment point, their expected income, and their cer- tainty equivalent income in a 2-dimensional state-contingent consumption space. (ii) Use the diagram to illustrate and explain how the merchant would benefit from buying insurance in a competitive insurance market. At which point a risk-neutral insurance firm would maximise their profits by offering the merchant full insurance?10.3 help me and explain2. Suppose there are only two people, Simon and Charity, who must split a fixed income of $100. For Simon, the marginal utility of income is MU, = 400 - 21, whereas for Charity, marginal utility is MU= 400 - 61 where I, I, are the amounts of income to Charity and Simon, respectively. a. What is the optimal distribution of income if the social welfare function is additive? b. What is the optimal distribution if society val- ues only the utility of Charity? What if the reverse is true? Comment on your answers. c. Finally, comment on how your answers change if the marginal utility of income for both Simon and Charity is constant: MU₂ = 400 MU, = 400
- The goal of health insurance is to O spread financial risk over a large group of people O equally distribute the probabifity of loss over a large number of people collect sufficient premiums to cover all possible losses O equalize the availability of medical care across population groups O redistribute income from the sick to the healthyThe Constant Relative Risk Aversion (CRRA) utility function is a widely used specifica- tion of preferences in economics that captures risk aversion and intertemporal consump- tion smoothing. The CRRA utility function has the desirable property that the degree of risk aversion is constant and independent of the level of consumption. This means that as a household's consumption grows, its willingness to take risks remains the same. The coefficient of relative risk aversion (σ) measures the extent to which households are risk- averse and prefer a smooth consumption path over time. A higher value of σ indicates a greater degree of risk aversion and a stronger preference for consumption smoothing. Consider a two-period endowment economy with a large number of identical house- holds. Each household has the following lifetime utility function: U(j) = C+(j) 1-0 - 1 1-σ +ẞ C++1(j) 1-0 - 1 1-σ where C₁(j) and C++1(j) are consumption in periods t and t + 1 for household j, re- spectively, ẞ is…The Minister of Transport released its Festive season road accident statistics which shows that the probability of drivers committing an accident is 8% with utility , where H standsfor year income.The Minister further claims these Festive season road accidents cost the state (in terms of claims lodged) an average of R84 000 per annum. The Road Accident Fund is an insurance scheme providing compulsory indemnity cover to victims of vehicle accidents and taxi drivers. (a) Suppose that an average commuter earns R84 000 per annum. What is the expected utility of each commuter if the driver decides not to take insurance. (b) What is the cost of insurance policy to the Road Accident Fund? (c) Due to high accident rates in South Africa during the Festive season, the Road AccidentFund has issued a warning to government that the fund will be insolvent soon. Advise the Minister on the cost of insurance that can collapse the scheme. please answer a,b,c