Economics 404

Onno owns a ship worth 500 million Euro. With a probability of p = 0.1, the ship sinks and its worth becomes 0. Onno is risk loving. (No more specific information on his risk attitudes is available.) Would he sell the ship for 475 million Euro?A firm produces one good with a technology given by the production function y = f (x) = ri. The factor price a and the price p for the good are fixed. a) Explore whether the production function exhibits increasing returns to scale. b) Determine the cost function!Problem 3 (continuation) c) Determine the demand function for the input factor! d) How much will the firm produce?Consider the following strategic form game, where the payoffs/utilities of player A are the left numbers in the matrix entries. Player B 61 62 63 5,4 3.3 Player A 2.2 4,5 1,3 2,4 1,6 a) Successively delete strictly dominated strategies as long as this is possible (i.e., apply iterative strict dominance)! Provide all necessary inequalities! Hint: You may use the matrices below to indicate the deleted strategies (one strategy per step only). Step 1 Player B Inequalities : bl 62 5.4 3.3 3.3 Player A 02 2.2 4,5 2,1 1.3 2,4 1,6 Step 2 Player B Inequalities : 61 5.4 3.3 3.3 Player A 12 2.2 4,5 2.1 03 1.3 2.4 Step 3 Player B Inequalities : bl 62 63 5.4 3,3 3,3 Player A 2.2 4,5 2,1 03 1,3 2,4 Step 4 Player B Inequalities : 62 13 Player A 3,3 3,3 2.2 4.5 2.1 1.4 2.4 1,6 b) Determine the Nash equilibria in pure strategies (if any) of the original game