Questions from Managerial Economics

Q: The statement “You get what you pay for” reflects the

The statement “You get what you pay for” reflects the common perception that high prices indicate high product quality and low prices indicate low quality. Irrespective of market structure considerati...

Q: In economic terms, what is the difference between risk and uncertainty

In economic terms, what is the difference between risk and uncertainty?

Q: Domestic investors sometimes miss out on better investment opportunities available to global

Domestic investors sometimes miss out on better investment opportunities available to global investors. At the same time, global investors face special risks. Discuss some of the special risks faced b...

Q: The standard deviation measure of risk implicitly gives equal weight to variations

The standard deviation measure of risk implicitly gives equal weight to variations on both sides of the expected value. Can you see any potential limitations of this treatment?

Q: Confronted with a choice between $50 today or $100 one

Confronted with a choice between $50 today or $100 one year from now, economic experiments suggest that the vast majority of people will take will take the $50 today. At the same time, economic experi...

Q: To many upscale homeowners, no other flooring offers the warmth,

To many upscale homeowners, no other flooring offers the warmth, beauty, and value of wood. New technology in stains and finishes call for regular cleaning that takes little more than sweeping and/or...

Q: State-run lotteries commonly pay out 50 percent of total lottery

State-run lotteries commonly pay out 50 percent of total lottery ticket sales in the form of jackpots and prizes. Use the certainty equivalent concept to quantify the minimum value placed on each risk...

Q: Graph the relation between money and its utility for an individual who

Graph the relation between money and its utility for an individual who buys both household fire insurance and state lottery tickets.

Q: If the expected net present value of returns from an investment project

If the expected net present value of returns from an investment project is $50,000, what is the maximum price that a risk-neutral investor would pay for it? Explain.

Q: “Market estimates of investors’ reactions to risk cannot be measured precisely

“Market estimates of investors’ reactions to risk cannot be measured precisely, so it is impossible to set risk-adjusted discount rates for various classes of investment with a high degree of precisio...