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Unformatted text preview: d. Graph the short-run supply function for this firm, being careful to label the key points on the graph with the numbers specifying the exact prices and quantities at these points. 3. Socrates owns just one ship. The ship is worth $200 million dollars. If the ship sinks, Socrates loses $200 million. The probability that it will sink is .02. Socrates total wealth, including the value of the ship is $225 million. He is an expected utility maximizer with von Neuman-Morgenstern utility U(W) equal to the square root of W. What is the maximum amount that Socrates would be willing to pay in order to be fully insured against the risk of losing his ship? Econ 3130.1 - Wissink - Fall 2008 PS#4 - XtraQ DUE: Friday October 24 in class...
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- Fall '06