Question
These are True/False statments. Where appropriate, be sure to justify your responses along with showing the appropriate formulae. - In the general equilibrium model with
These are True/False statments. Where appropriate, be sure to justify your responses along with showing the appropriate formulae.
- In the general equilibrium model with production and trade, we have found that in equilibrium, consumer utility will be tangent to each other at a point on the production possibility frontier. Is the preceding statement true, false, or uncertain.
- David is an expected-utility maximizer that likes to drive fast (and reckless at times), so his probability of an accident is 2/3. David's preferences over wealth are u(w) = . Suppose that David's initial wealth is $100. If David has an accident, he incurs a $51 loss. How much is the risk premium David willing to pay to be as well off in case of accident or not?
- For a monopolist with linear demand curve and constant marginal costs, show that the consumer surplus is equal to the DWL.
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