EBK MICROECONOMICS
5th Edition
ISBN: 9781118883228
Author: David
Publisher: YUZU
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Question
Chapter 4, Problem 4.19P
To determine
(A)
To find:
Whether the individual will borrow or lend or stand neutral for the given utility function.
To determine
(B)
To find:
Whether the individual will borrow or lend or stand neutral for the given utility function.
To determine
(C)
To find:
Whether the individual will borrow or lend or stand neutral for the given utility function.
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Students have asked these similar questions
Seung's utility function is given by U - C^(1/2), where C is consumption and C^(1/2) is the square root of consumption. She makes $50,625 per year and enjoys jumping out of airplanes. There's a 5% chance that in the next year, she will break both legs, incur medical costs of $30,000, and lose an additional $5,000 from missing work.
a. What is Seung's expected utility without insurance?
b. Suppose Seung can buy insurance that will cover the medical expenses but not the forgone part of her salary. How much would an actuarially fair policy cost, and what is the expected utility if she buys it?
Policy cost: $___
Expected utility: ___
c. Suppose Seung can buy insurance that will cover her medical expenses and foregone salary. How much would such a policy cost if it's actuarially fair, and what is her expected utility if she buys it?
Policy cost: $___
Expected Utility: ___
The diagram depicts Julia's choice of consumptions in periods 1 and 2. She has no income in period 1 and
an income of $100 in period 2. In scenario 1 the interest rate is 10%, while in scenario 2 it is 78%. Based on
this information, which of the following statements is correct?
FF (10% interest rate)
FF (78% interest rate)
Julia's 100
endowment
Julia's IC (higher utility)
Julia's IC
Julia's IC (through point F)
Julia's IC (lower utility)
35
56 58
91
Consumption now ($)
Select one:
O a. The substitution and income effects of the interest rate rise partially offset each other, resulting in
lower consumption in period 1 under scenario 2.
O b. Julia consumes less in period 1 at G under scenario 2 than at E under scenario 1. because she is
less impatient at G.
O C. For the scenario of no income in period 1 and an income of $100 in period 2, Julia is unambiguously
worse off with an interest rate rise.
Julia
able to consume more in period 2 at G under scenario 2 than at E under scenario 1,…
2.
Suppose Jill derives utility from not only consuming goods, but also from
enjoying leisure time. Let her utility function be defined as follows: U=C.25.R.75
where C is a consumption good that can be bought at a price of $1 and R is hours
of leisure (relaxation) consumed per day. There are 24 hours in a day and leisure
is defined as time spent not working. Jill has a job that pays $w per hour, a trust
fund that pays her $M per day, and she can work any number of hours per day, L,
she desires.
C, consumption good; R, Leisure (relaxation); L, labor
M, non-wage income; w, wage rate.
a. Derive her labor supply function?
b. Assume M = $100, at what wage is her quantity supplied of hours = 0?
Chapter 4 Solutions
EBK MICROECONOMICS
Ch. 4 - Prob. 1RECh. 4 - Prob. 2RECh. 4 - Prob. 3RECh. 4 - Prob. 4RECh. 4 - Prob. 5RECh. 4 - Prob. 6RECh. 4 - Prob. 7RECh. 4 - Prob. 8RECh. 4 - Prob. 9RECh. 4 - Prob. 10RE
Ch. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Prob. 4.4PCh. 4 - Prob. 4.5PCh. 4 - Prob. 4.6PCh. 4 - Prob. 4.7PCh. 4 - Prob. 4.8PCh. 4 - Prob. 4.9PCh. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 4.22PCh. 4 - Prob. 4.23PCh. 4 - Prob. 4.24PCh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Prob. 4.28PCh. 4 - Prob. 4.29PCh. 4 - Prob. 4.30P
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