Continue from 2. To avoid shortages, the government decides to pay milk
sellers enough of a subsidy for each unit of milk so as to make supply equal
demand. The government has to subsidy
4 dollars for each unit of milk.
8 dollars for each unit of milk.
None of the above
Alice is growing a crop where the only risk is a flood. Floods are known to
occur with probability 0.1. If a flood occurs, her harvest is worth S1000.
Otherwise, she will have harvest worth $3000. She may insure the harvest
against a flood at a percent insurance premium γ = 0.2 . That is, if Alice
purchases insurance policy worth C dollars, Alice pays 0.2C in both cases and
would get C if a flood occurs. Alice aims to maximize her expected utility.
If Alice’s utility function of wealth is In (W), she will choose C = $2000 .
If Alice’s utility function of wealth is In (W), she will choose C = $3000 .
If Alice’s utility function of wealth is In (W), she will choose C = $1500 .
If Alice’s utility function of wealth is 2W + 3 , she will choose C = 0 .
If Alice’s utility function of wealth is 2W + 3 , she will choose C = $2000 .
Alaka likes guns and tobacco. She owns a factory which produces 15 guns and
8 units of tobacco every week. She has no other source of income. Her
preference over guns and tobacco is convex. The market prices are $2 per gun
and $10 per unit of tobacco. At these prices; she chooses to sell nothing and
buy nothing.
If only the price of gun rises, Alaka will be worse off.
If only the price of gun rises, Alaka will be better off.
If both prices rise, she will be worse off, but if only one price rises, she
might be better off or worse off, depending on her tastes.
If prices change in any way, she will certainly be no worse off and maybe
better off.
None of the above.
More than 5 eggs and more than 10 tomatoes
More than 5 eggs and less than 10 tomatoes
Less than 5 eggs and more than 10 tomatoes
Less than 5 eggs and less than 10 tomatoes
5 eggs and 10 tomatoes
A change in the interest rate won't affect his saving.
He will consume the same amount in each period.
He wall consume more in period 2.
He will save 50,000.
None of the above.
Continue from 8. Assume now that Jillian is moved away and She public good
is financed by private contributions from Dan and Nick.
If Dan decides to contribute 20 dollars to fund the public good, what is the best
response of Nick?
Nick’s best response is to contribute 5 dollars
Nick’s best response is to contribute 10 dollars.
Nick’s best response is to contribute 20 dollars.
Nick’s best response is to contribute nothing.
None of the above.
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