Consider a risk-averse individual who has utility function u(a) which is increasing with u(0) = 0. There are two risky assets: A, B. For A, every dollar invested gives a return of $0 with a probability of 1/3 and $3 with a probability of 2/3. For B, every dollar invested gives a return is $0 with a probability of 1/4 and $3 with a probability of 3/4. The individual has $120 to invest. Consider two investment choices: (1) invest an entire $120 in A and (2) invest $60 in A, $60 in B.

(a) Draw the diagram of the utility function and show your work, determine the expected utility of the individual from choice 1.

(b) Draw the diagram of the utility function and show your work, determine the expected utility of the individual from choice 2 when return from A is bad.

(c) Draw a diagram of the utility function and show your work, determine the expected utility of the individual from choice 2 when return from A is good.

(d) Draw a diagram of the utility function and show your work, determine the expected utility of the individual from choice 2.

(e) Comparing expected utility from choices 1,2 in a diagram, determine which choice is better.

How do primary and secondary industries differ

Ok, so, theoretical question: if i bought the mona lisa legally, would anyone be able to stop me from eating it? why or why not?

Aprice ceiling is “binding” if the price ceiling is set below the equilibrium price. suppose that the equilibrium price is $5. if a price ceiling is set at $6, this will not affect the market in any way since $5 remains a legally allowable price (since $5 < $6). a price ceiling of $6 is called a “non-binding” price ceiling. on the other hand, if the price ceiling is set at $4, the price ceiling is “binding” because the natural equilibrium price is $5 but that is no longer allowed. what happens when there is a binding price ceiling? at a price below the equilibrium price, quantity demanded exceeds quantity supplied. there is a shortage. normally, price increases eliminate shortages by increasing quantity supplied and decreasing quantity demanded. in this case, however, price increases are not allowed past the price ceiling. we therefore predict that the observed market price will be right at the price ceiling and there will be a permanent shortage. the observed quantity bought and sold will be dictated by the quantity supplied at the price ceiling. although consumers would like to buy more, there are no more units for sale