D. do not require a risk premium for bearing it
If a person is highly risk averse, the higher marginal utility associated with a negative outcome outweighs the lower marginal utility from a positive outcome.
<h3>What is marginal utility?</h3>
The extra satisfaction which a consumer receives from possessing one more unit of an item or service is known as marginal utility.
The concept of marginal utility is helps in describing how customers make decisions to get the most out of their limited budgets. In general, until the marginal utility exceeds the marginal cost, consumers will keep buying more of a good.
There are three types of Marginal utility:
- Positive Marginal Utility: When having more of something provides you more happiness, you have positive marginal utility. Assume you regularly eat a piece of cake, however a second piece would bring you even more joy. Then the marginal utility from cake consumption is positive.
- Zero Marginal Utility: It occurs when using more of an item provides no additional measure of satisfaction. For instance, you might feel reasonably full after 2 pieces of cake but not significantly better after a third slice. Your marginal utility on eating cake is 0 in this situation.
- Negative Marginal Utility: It occurs when you have an abundance of an item, and ingesting more is really hazardous. After eating three slices of cake, the fourth piece of cake may potentially make you sick.
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Answer:
a. 13,000 units
b. $1,690,000
Explanation:
By using the equation method and contribution margin per unit approach is shown below:-
Variable expenses per unit = $66 + $12
= $78
Fixed expenses = $450,000 + $226,000
= $676,000
Contribution margin per unit = Selling price - Variable cost
= $130 - $78
= $52
Contribution margin ratio = Contribution margin ÷ Selling price
= $52 ÷ $130
= 40%
now, by the above calculation we can using the equation method and contribution margin per unit approach.
a.By using equation method is shown below:-
Break even unit in sales = Fixed cost ÷ (Selling price - Variable cost)
= $676,000 ÷ ($130 - $78)
= $676,000 ÷ $52
= 13,000 units
b. By using contribution margin per unit approach is shown below:-
Break even in dollar sales = Units × Selling price
= $676,000 ÷ 40%
= $1,690,000
Answer:
-37.51
Explanation:
Confidence interval = 1 - Probability * 2
= 1 - 0.025*2
= 0.95
= 95%
As per 95% rule
, range = mean +/- 2 * Standard deviation
= 11.57 +/- 2 * 24.54
= 11.57 - 2 * 24.54 to 11.57 + 2 * 24.54
= 11.57 - 49.08 to 11.57 + 49.08
= -37.51 to 60.65
Conclusion: -37.51 is the lower bound hence it is the max one can expect to lose in any given year.
The purely competitive market structure is allocative efficient because production takes place at a point where price is equal to marginal cost.
<h3>What is a
purely competitive market?</h3>
A purely competitive market is a market structure that is characterised by many sellers of goods that are considered homogenous. There is perfect information in the market and the price in this market is set by the forces of demand and supply. In a purely competitive market, there is little or no barriers to entry into the market.
In a purely competitive market is allocative efficient because products are optimally distributed among buyers in an economy. This means that production takes place at a point where price is equal to marginal cost.
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