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Final

EXAM PRACTICE QUESTIONS 15

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Department
Economics
Course
ECO200Y5
Professor
Robert Barber
Semester
Summer

Description
TUTORIAL 16MONDAYAUGUST 11 2014 4PM5PM QUESTION 152p 563 Clare manages a piano store Her utility function is given byUtilityw100where w is the total of all monetary to her and 100 represents the cost to her of the effort of running the store Clares next best alternative to managing the store provides her with zero utility The stores gross profit depends on random factors There is a 50 chance it earns 1000 where by earnings we mean gross profits not including payments to the manager and a 50 chance it earns only 400a If shareholders offered to share half of the stores gross profit what would her expected utility be Would she accept such a contract What if she were only given a quarter share What would be the lowest share she would accept to manage the firmb What is the most Clare would pay to buy out the store if shareholders decided to sell it to herc Suppose instead that shareholders decided to offer her a
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