Microeconomics: Theory and Applications with Calculus, 4e

Exercises

All exercises are available on MyEconLab; ${*}^{}=\text{answer}$ appears at the back of this book; $\mathbf{M}=\text{mathematical}$ problem.

1. Assessing Risk

1. 1.1 In a neighborhood with 1,000 houses, 5 catch fire (but are not damaged by high winds), 7 are damaged by high winds (but do not catch fire), and the rest are unharmed during a one-year period. What is the probability that a fire or high winds damage the house? M

2. *1.2 Asa buys a painting. With a 20% probability, the artist will become famous and the painting will be worth $1,000. With a 10% probability, a fire will destroy the painting so that it becomes worthless. If the painting is not destroyed and the artist does not become famous, it will be worth $500. What is the expected value of the painting? ...