Anna's utility function is U= 11.4/20 where I is income. An investment opportunity where there is...

 

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Anna's utility function is U= 11.4/20 where I is income. An investment opportunity where there is a 30% change of earnings $200, a 35% change of earnings $500 and a 35% chance of earning $2,000 has presented itself. Find Anna's risk premium The annual demand for coffee by Canadian consumers is given by the demand curve Q = 20 -0.4P, where Q is quantity (in millions of kg) and P is the market price per kg of coffee and the domestic supply is given by the curve Q= -2 + 0.5P. World producers can harvest and ship coffee to Canada at a price of $10 per kg. A) What is the equilibrium price and quantity of coffee in Canada? What is the consumer and producer surplus at equilibrium? B) If the government of Canada imposes a $12 price ceiling. Compute the new quantity supplied. Compute the new consumer and producer surplus and the deadweight loss. Anna's utility function is U= 11.4/20 where I is income. An investment opportunity where there is a 30% change of earnings $200, a 35% change of earnings $500 and a 35% chance of earning $2,000 has presented itself. Find Anna's risk premium The annual demand for coffee by Canadian consumers is given by the demand curve Q = 20 -0.4P, where Q is quantity (in millions of kg) and P is the market price per kg of coffee and the domestic supply is given by the curve Q= -2 + 0.5P. World producers can harvest and ship coffee to Canada at a price of $10 per kg. A) What is the equilibrium price and quantity of coffee in Canada? What is the consumer and producer surplus at equilibrium? B) If the government of Canada imposes a $12 price ceiling. Compute the new quantity supplied. Compute the new consumer and producer surplus and the deadweight loss.

Answer rating: 100% (QA)

To find Annas risk premium we need to calculate the expected utility of the investment opportunity a... View the full answer