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Danielle is a farmer, with a utility function of U = I0.5, where U is Danielle’s utility and I is her income. If the weather is good, she will earn $100,000. If there is a hailstorm, she will earn only

Question

Imagine that you have $100 of ill-gotten gains stashed in an offshore bank account. Lest the IRS get too nosey, you plan to leave that account idle until your retirement in 45 years.
a. If your bank pays you

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Speedy Steve is a traveling salesman. His utility function is given by U = I0.5, where U is his utility and I is his income. Steve’s income is $900 each week, but if Steve is caught speeding while making his

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You are considering the purchase of an old fire station, which you plan to convert to an indoor playground. The fire station can be purchased for $200,000, and the playground will generate lifetime profits (excluding the cost of the building)

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You are romantically interested in Chris, but have always wanted to date the president of the Economics Club. As it turns out, Chris is battling Pat for control of the Econ Club. That battle should be decided in a year,

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You have $832.66 in a savings account that offers a 5.25% interest rate.
a. If you leave your money in that account for 20 years, how much will you have in the account?
b. Suppose that inflation is

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Marian currently makes $40,000 a year as a librarian. She is considering a career change: For a current expenditure of $30,000, she can obtain her florist’s license and become a flower arranger. If she makes that career change, her earnings

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Ralph is considering purchasing an ostrich, which he can graze for free in his backyard. Once the ostrich reaches (in exactly three years), Ralph will be able to sell it for $2,000. The ostrich costs $1,500.
a.

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Consider the following two bonds: a Treasury bill that will pay you $1,000 in 1 year, and a zero-coupon Treasury bond that will pay you $1,000 in 30 years.
a. Calculate the value of each of these bonds today

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You are a bunny rancher.
a. Suppose that you have 100 bunnies, and that because of your successful animal husbandry, your stock of bunnies grows by 20% each year. How many bunnies will you have at the end of