eco question
Module 4 quiz answer key
1. Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers.
Demand for good cars is:
Q = 50 if P ≤ $300
Q = 0, otherwise
Demand for bad cars is:
Q = 50 if P ≤ $120
Q = 0, otherwise
Supply for good cars is:
Q = 75 if P ≥ $150
Q = 0 otherwise
Supply for bad cars is:
Q = 75 if P ≥ $100
Q = 0 otherwise
Determine the full information symmetric equilibrium price in the market for good cars.
2. Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers.
Demand for good cars is:
Q = 50 if P ≤ $300
Q = 0, otherwise
Demand for bad cars is:
Q = 50 if P ≤ $120
Q = 0, otherwise
Supply for good cars is:
Q = 75 if P ≥ $150
Q = 0 otherwise
Supply for bad cars is:
Q = 75 if P ≥ $100
Q = 0 otherwise
Determine the full information symmetric equilibrium quantity in the market for good cars.
3. Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers.
Demand for good cars is:
Q = 50 if P ≤ $300
Q = 0, otherwise
Demand for bad cars is:
Q = 50 if P ≤ $120
Q = 0, otherwise
Supply for good cars is:
Q = 75 if P ≥ $150
Q = 0 otherwise
Supply for bad cars is:
Q = 75 if P ≥ $100
Q = 0 otherwise
Determine the full information symmetric equilibrium price in the market for bad cars.
4. Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers.
Demand for good cars is:
Q = 50 if P ≤ $300
Q = 0, otherwise
Demand for bad cars is:
Q = 50 if P ≤ $120
Q = 0, otherwise
Supply for good cars is:
Q = 75 if P ≥ $150
Q = 0 otherwise
Supply for bad cars is:
Q = 75 if P ≥ $100
Q = 0 otherwise
Determine the full information symmetric equilibrium quantity in the market for bad cars.
5. Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers.
Demand for good cars is:
Q = 50 if P ≤ $200 Q = 0, otherwise
Demand for bad cars is:
Q = 50 if P ≤ $80 Q = 0, otherwise
Supply for good cars is:
Q = 75 if P ≥ $150 Q = 0 otherwise
Supply for bad cars is:
Q = 75 if P ≥ $50 Q = 0 otherwise
Assume that the buyers cannot tell whether a car is good or bad. What is the asymmetric equilibrium quantity in the market for good cars?
6. Assume that there is a market for used cars where there are only two types of cars:
good cars and bad cars. Below is the full information for consumers and sellers.
Demand for good cars is:
Q = 50 if P ≤ $300 Q = 0, otherwise
Demand for bad cars is:
Q = 50 if P ≤ $80 Q = 0, otherwise
Supply for good cars is:
Q = 75 if P ≥ $150 Q = 0 otherwise
Supply for bad cars is:
Q = 75 if P ≥ $50 Q = 0 otherwise
Assume that the buyers cannot tell whether a car is good or bad. What is the asymmetric equilibrium price in the market for bad cars?
7. Susan is considering whether to buy health insurance. Her utility is given by 𝑈𝑈 = √𝐼𝐼 , where I is her yearly income equal to $81,000. However, there is a 3% chance that she’ll fall sick with a flu virus, which will cost her $10,000. What is the expected utility of not buying any insurance? (round your answer to the nearest two decimal places)
8. Susan is considering whether to buy health insurance. Her utility is given by 𝑈𝑈 = √𝐼𝐼 , where I is her yearly income equal to $81,000. However, there is a 3% chance that she’ll fall sick with a flu virus, which will cost her $10,000. What is the actuarially fair premium for full health insurance in this case?
9. Susan is considering whether to buy health insurance. Her utility is given by 𝑈𝑈 = √𝐼𝐼 , where I is her yearly income equal to $81,000. However, there is a 3% chance that she’ll fall sick with a flu virus, which will cost her $10,000.
What is her expected utility from buying full and fair insurance? (round to the nearest 2 decimals places)
10. Susan is considering whether to buy health insurance. Her utility is given by , where I is her yearly income equal to $81,000. However, there is a 3% chance that she’ll fall sick with a flu virus, which will cost her $10,000. Assume that the flu is the only likely health expenditure that Susan would face. If the cost of the flu shot is $500 and the flu shot reduces the probability that she gets the flu to 1%, should she choose the insurance or the flu shot? Fully justify your answer by showing your calculations.