Unformatted text preview: “pollution-reducting-captial” on its axes (b) If two diﬀerent ﬁrms have diﬀerently shaped iso-quant curves, would the best method of reducing pollution require each to product equal amounts of CO 2 per unit of production? Why or why not? 5. What is the present value of $100 paid out each period forever (begininng at the end of the ﬁrst period) if the interest rate is 10%? 6. Suppose a lottery pays $100 with probability 1/4 and $0 with probability 3/4. (a) What is the expected income from the lottery? (b) Give a formula for the “expected utility” from the lottery. (c) Which is likely to be higher, expected income or expected utility? 1...
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This note was uploaded on 04/08/2008 for the course ECON 115 taught by Professor Stevenberry during the Fall '07 term at Yale.
- Fall '07