HW1 - Economics 467 Spring 2010 Karl Dunz Problem Set 1 due...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Economics 467 Spring 2010 Karl Dunz Problem Set 1 due Monday February 15 You are encouraged to work in groups on these problems; however, you must turn in your own work, not a copy of what the group has done. Also, I will not accept any late assignments since I will post answers to these problems shortly after the due date. 1. [6 points] Consider the following three lotteries: u1D43F 1 = [480 , . 5; 480 , . 5], u1D43F 2 = [850 , . 5; 200 , . 5], and u1D43F 3 = [1000 , . 5; 0 , . 5]. Each lottery represents the consumption an agent would receive if they invested in the corresponding project. (a) Which lottery would a risk-neutral agent choose? (b) Which lottery would a risk-averse agent with a von Newmann-Morgenstern utility function of u1D462 ( u1D450 ) = u1D450 1 / 2 choose? Would all risk-averse agents make the same choice? Explain your answer. (c) Which lottery would a risk-loving agent with a von Newmann-Morgenstern utility function of u1D462 ( u1D450 ) = u1D450 2 choose? Would all risk-loving agents make the same choice? Explain your answer. 2. [3 points] Consider a case with the following facts. John Doe was struck by a speeding taxi as he crossed a street. The taxi was driving the wrong way down a one-way streettaxi as he crossed a street....
View Full Document

This note was uploaded on 05/16/2010 for the course ECON 467 taught by Professor Dunz during the Spring '10 term at Washington University in St. Louis.

Page1 / 2

HW1 - Economics 467 Spring 2010 Karl Dunz Problem Set 1 due...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online