2005finsoln - 2005 Final Examination - Partial Answers PART...

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

View Full Document Right Arrow Icon
2005 Final Examination - Partial Answers PART A: 1. see notes, with WTP L ( q =0)= 1 4 WTP L ( q =0)se llonlytohighdemand 2. under Cournot, if both f rms produce 1 2 q M each f rm will still have an incentive to increase output since they get the full amount of the gain but only part of the infra- marginal loss. 3. see notes for shape of portfolio frontier. if when ρ = 1 , α = 1 then same optimal portfolio for both ρ = 1and ρ =1 4. r b =100% 5. c c T =1 1 (1 + r ) T if r =0 , c c T = 0 because with no discounting the perpetuity’s coupon rate must be in f nitely small. In generaly, as r increases ratio approaches 1 , perpetuity coupon payments received after T have smaller and smaller PV so coupon payments must be closer in size. As T increases ratio approaches 1 , the T year bond begins to look like aperpetu ity . 6. Compare where indi f erence curves cross the 45 degree line. 7. When π l is low there will be trade in both types, as π l increases there will be loss of the market for the good cars. Increasing variance won’t change E { WTP } >P g >P
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

2005finsoln - 2005 Final Examination - Partial Answers PART...

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