Compute the first best contract for the monopoly insurer (i.e. supposing it can observe the individual’s dominant hand)

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Subject: General Questions    / General General Questions

Suppose that the left-handed people are more prone to injury than right-handed people. Lefties have an 80 percent chance of suffering an injury leading to a $1,000 loss (in terms of medical expenses and the monetary equivalent of pain and suffering) but righties have only a 20 percent chance of suffering such an injury. The population contains equal numbers of lefties and righties. Individuals all have logarithmic utility-of-wealth functions and initial wealth of $10,000. Insurance is provided by a monopoly company.

a. Compute the first best contract for the monopoly insurer (i.e. supposing it can observe the individual’s dominant hand). (20 points)

b. Set up the constrained profit maximization problem that would solve for the payouts and the insurance prices for both types in the second-best contract. Construct the necessary constraints and indicate the choice variables that would solve the optimization problem

 

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Describe what changes you anticipate this would make to the accuracy, documentation, expense, and convenience of the voting process.

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The ultimate expression of freedom in the United States is the right to vote. This right is deeply treasured by many Americans, but there are those that take the process for granted. How is my vote counted? Do I have fair representation in Congress? Does my vote make a difference? These are the kinds of questions a concerned citizen must ask when considering the voting process.
There are a number of different methods for counting votes used around the world ranging from majority rule to the constitutionally mandated electoral college used to determine the US presidency. In order to explore the complexities of the voting process and methods used to assure fairness, let’s examine the following scenario:
In the near future, Congress and the states will abolish the process of voting at the polls in the United States. Instead, all citizens will cast their votes via an approved and secure smartphone app.
In your post, address the following questions:

Describe what changes you anticipate this would make to the accuracy, documentation, expense, and convenience of the voting process.
What method of fairness do you feel would be best suited to counting the votes in this process: majority rule or some other variation?
Explain whether this method of voting could be considered truly secure.
What are some unintended consequences that could arise from this method of casting votes?

When constructing your response, consider the theories, examples, and concepts discussed in your readings this module, and refer to them to support your conclusions.
Write your initial response in a minimum of 200 words. Apply APA standards to citation of sources.

 

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Illustrate the budget line faced by Ian, with “other goods” on the vertical axis and lattes on the horizontal axis. If he chooses to consume 15 lattes a month, how much does he spend on other goods? Using an indifference curve, illustrate the choice.

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ECONOMICS 110/111

Ian is a Queen’s student who has $120 to spend every month on two goods, lattes and a composite good representing “all other goods”. Assume initially that the price of a latte is $4 and the price of “other goods” is normalized to $1.

  1. (a) Illustrate the budget line faced by Ian, with “other goods” on the vertical axis and lattes on the horizontal axis. If he chooses to consume 15 lattes a month, how much does he spend on other goods? Using an indifference curve, illustrate the choice.
  2. (b) Suppose the price of lattes increases to $6. Illustrate the new budget line. Suppose Ian’s new choice is to consume 12 lattes. How much does he spend now on other goods? Illustrate this new point with an indifference curve. Is he better off or worse off after the price change?
  3. (c) Can you tell whether Ian thinks of “other goods” as normal or inferior? What about lattes? [Hint: explain the income and substitution effects of the price change]
  4. (d) Using the information concerning the price change from parts (a) and (b) illustrate Ian’s demand curve for lattes, assuming that it is linear. Calculate and illustrate the change in consumer surplus as a result of the price increase.
  5. (e) SupposeIan’sparentsfeelbadforhimandoffertopay$30/monthfora“lattemembership”cardthat would allow him to purchase lattes at the original price. Explain why he would prefer it if his parents just sent him $30/month.

 

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How many acres of farm land will not be cultivated at the optimal solution?

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Bradley Family

(a) Let X1 = # of acres of corn and X2 = # of acres of tobacco

Corn Tobacco Resources Available
300 520
Land 1 1 <= 410
Budget 105 210 <= 52500
Govt. Restriction 0 1 <= 100 Government Restriction

X1 X2
Decision Variables

Objective function

(b)
Do the Bradleys use the entire 100 acre tobacco allotment?

(‘c) Should the Bradleys’ lease extral land from their neighbor at $110 per acre?
What is the maximum price the Bradleys’ should pay their neighbor? And how much land shoud they lease?

maximum price
# of acres of land

(d) For each dollar they borrow , how much additional profit will they make?
If they borrowed a additional $1000, would the number of acres of corn and tobacco they plant change?

 

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