Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 6DQ
To determine
The risk averse nature towards a neutral result.
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Label each of the following behaviors with the correct bias or heuristic. LO8.3 a. Your uncle says that he knew all along that the stock market was going to crash in 2008. b. When Fred does well at work, he credits his intelligence. When anything goes wrong, he blames his secretary. c. Ellen thinks that being struck dead by lightning is much more likely than dying from an accidental fall at home. d. The sales of a TV that is priced at $999 rise after another very similar TV priced at $1,300 is placed next to it at the store. e. The sales of a brand of toothpaste rise after new TV commercials announce that the brand “is preferred by 4 out of 5 dentists.”
Rue operates a food truck on Florida beaches, where she sells paninis and drinks, which she can sell for $8.00 and $4.00, respectively. Rue uses all of the money she makes to purchase theme park tickets, which cost $96.00, and her only other income comes from dividend payments of $32.00 from her investment portfolio. Let ?1 represent paninis, ?2 represent drinks, ? represent tickets, and ? represent dividend income. Complete Rue's budget equation: 8 ?1 + 4 ?2 + 32 = 96 ? Two of Rue's friends are coming to town,
Jin's Utility Function
Wealth
Utility
(Dollars)
60,000
4,000
61,000
4,110
62,000
4,209
63,000
4,288
Refer to Table 27-1. If Jin's current wealth is $61,000, then
O his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is not risk
averse.
O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is not risk
averse.
O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is risk
averse.
his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is risk averse.
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