Homework Help for Economics (page 3154)
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The following payoff matrix shows the profit outcomes for threeprojects, A, B, and C, for each of two possible product prices.There is a 60% probability the price will be $10 and a 40%probability the price will be $20.
Project P = $10 P = $20
A 20 80
B 40 60
C -26 140
a. Using the maximum expected value rule a decision maker wouldchoose project B. Explain.
b. Using the mean variance rule a decision maker would also chooseproject B. Explain Why.
Suppose that three risk-neutral bidders are interested in purchasing a Princess Beanie Baby. The bidders (numbered 1 through 3) have valuations of $12, $14, and $16, respectively. The bidders will compete in auctions as described in parts (a) and (b); in each case, bids can be made in $1 increments at any value from $5 to $25.
(A) Which bidder wins an open-outcry English auction? What are the final price paid and the profit to the winning bidder?
(B) Which bidder wins a second-price sealed-bid auction? What are the final price paid and the profit to the winning bidder? Contrast your answer here with that for part (a). What is the cause of the difference in profits in these two cases?
Consider the case in which 100 adults each own an antique stamp, purchased for $1 each in 1972, and these individuals value the the stamp. Each owner values the stamp differently, between $1 and $100 (i.e., one person values his stamp at $1, a second values hers at $2, and so on, with each additional person valuing the stamp by $1 more, until the 100th person values it at $100).
The Museum decides to set up an exhibit on the the stamp, offering to buy the stamps for $51 each. This is a one-time offer, and, since there is not an active market in these stamps, owners of the stamps face the choice of selling their stamps to the museum or holding on to the stamps forever. The only catch is that profits made by selling stamps (that is, the difference between sales price and original purchase price) represent taxable capital gains to the seller.
Assuming that the tax rate (for everyone) on capital gains is 20%, how many people will sell their stamps? What tax revenue will the government receive? What (in numbers) is the deadweight loss associated with this tax, and what (in words) is its source?
1) In 2003, a seat on the Chicago Board of Trade (CBOT) sold for only $338,000, compared to $2.0 million for on the New York Stock Exchange (NYSE). In January 2005, however, a CBOT seat was sold for $1.25 million, while a NYSE seat sold for $975,000. First, explain why anyone would pay a positive price for a CBOT or NYSE seat and what this price represents. Second, explain why the seat values changed so much.
Sources must be cited in APA format. Your response should be four (4) double-spaced pages; refer to the "Assignment Format" page located on the Course Home page for specific format requirements.
Politicians are often heard saying that tuition at state universities should be kept low "to make education equally accessible to all residents of the state, regardless of income."
Assuming that state funding for the universities is held constant, describe the conditions that will prevail if tuition is held below equilibrium price. Provide one (1) example to support your response.
Will education really be "equally accessible" under these conditions? Provide one (1) example to support your response.
Using the Internet, research the influenza vaccine, or "flu shot." Use the following to guide your research:
Think about the flu shot in the context of a public good.
What are the economic benefits of the flu shot?
In what ways has the government become involved in the distribution of flu shots? For what reasons?
Describe one (1) reason why the private market for flu vaccinations would produce an inefficient outcome.
Describe one (1) way that government involvement could achieve an efficient quantity of vaccinations.
Provide one (1) original example for each of the following:
a private good
a public good.
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