EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 17, Problem 1SP
To determine
Nature of the consumer.
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Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an investment of 3 percent. Assume the
nominal interest rate is 8 percent and the inflation rate is 4 percent.
Instructions: Enter your answer as a whole number.
a. Using this information, we can conclude that the investment would not be profitable
b. Suppose that in year 2, the real interest rate changes to 7 percent while inflation remains constant at 4 percent.
In year 2, the nominal interest rate must be
percent.
You are trying to decide between rescuing a puppy or an older dog. You decide to try to assign some numbers to your
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your belongings and a 90% chance of going on hikes.
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give me accurate answer
Chapter 17 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- John owns and runs a food truck, which he expects to increase his wealth to $40,000 this year. John knows that every year, there is a 20% chance that his truck will be firebombed by one of his ruthless food truck competitors. If this happens, he will face a bill of $10,000 in repairs and lost income. John can choose to get insurance to cover all repair costs and lost wealth. Use this information and the information in the table and graph to answer the questions. Total utility Wealth Total utility (utils) 730 1000 $32,000 900 $34,000 755 800 700 $36,000 785 600 792 500 $38,000 400 300 200 100 0 $5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 Wealth What is John's expected wealth? expected wealth: $ What is the price for John's insurance? price of insurance: $ What is John's expected utility without insurance? expected utility: 730 If John chooses to pay the insurance policy price, what would be his total utility? total utility: 1030 42000 10000 utils utilsarrow_forwardAs an investment advisor, you tell a client that an investment in a mutual fund has (over the next year) a higher expected return than an investment in the money market. The client then asks the following questions: a. Does that imply that the mutual fund will certainly yield a higher return than the money market? b. Does it follow that I should invest in the mutual fund rather than in the money market? How would you reply?arrow_forwardPlease give the correct answer.arrow_forward
- Evaluate wrong options as well.arrow_forwardYou start an insurance company as your first entrepreneurial venture after graduation. Your main product line is malpractice insurance for dentists. After exhaustive research, you learn that settling malpractice claims against careful dentists costs $2,000 and settling malpractice claims against reckless dentists costs $7,500. Individual dentists know whether they are reckless or careful, and your research shows that approximately 20% of dentists are reckless. How much do should you charge for malpractice insurance to break even?arrow_forwardPlease answer as accurately as possiblearrow_forward
- You see an advertisement for a used car. The owner has not set a price but asks for people to make him an offer. You inspect the car and believe that the true value is equally likely to be anywhere in the range of $1,000 to $9,000 (so your calculation of the average of this value is $5,000). The current owner knows the exact true value, and he will for sure accept your offer if it is higher than the true value (but not if it is lower than that value). If your offer is accepted and you get the car, then you will find out the true value. But you know in advance that your amazing car repair skills can increase the value of the car by 25% of whatever its true value is. What is your expected profit if you offer $5,000? Round your answer to the nearest dollar (e.g. 500). If you expect to make a loss, add a minus sign (e.g. -500, please do not include space between minus sign and the number if the answer is negative). Note:- Do not provide handwritten solution. Maintain accuracy and quality…arrow_forwardNeed on point answer. Thanks. Waitingarrow_forwardNeed correct answer.please as soon as possible.thank youarrow_forward
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