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Chandra decided that she doesn't like salsa, yet she still plans to go the next lesson because it doesn't cost her anything. Evaluate Chandra's logic.
You have a friend who runs up a balance on his credit card by buying new furniture. Explain to your friend how he could manage his finances more sensibly.
Which can take a few days. Vicki still prefers for her customers to put her tip on their credit card. Why might Vicki have this preference?
By how much would you need to value the director's cut over the theatrical version for it to make sense for you to sell the version you bought?
Based on this information, how much would you have to enjoy the next bowling game, expressed in terms of dollars, to play another game?
What was the opportunity cost of acquiring the iPod? What is the opportunity cost of choosing to keep the iPod?
What will your credit card balance be in one year? Assume no additional credit card payments during this time.
Why is strategic behavior required to win a presidential election? Describe some of the rules, strategies, and payoffs that define this game in the real world.
What is the noncooperative outcome, and why does it occur? What is the cooperative outcome, and how could the neighbors achieve this outcome?
Toni and Kala are new coworkers. They make a plan to go out together every Thursday night. Explain why Kala is likely to be disappointed.
Use backward induction to determine what you should do to work toward that goal right now and describe each step in your logic.
You are playing a game with a friend. It's your move but you don't have a dominant strategy. Explain how using backward induction will determine your next move.
Explain why you are likely to get lower offers from used-car dealers if they find out that you are moving away soon.
Think of moneylenders as credit agents operating in a monopolistic environment. Explain the social inefficiencies in this scenario.
Moral hazard is a problem because poor borrowers lack collateral. Why Would you expect borrowers to take this risk?
A microfinance institution aims to break even. In plain and clear language, explain why this is the case.
Briefly explain the main insights gained from this ex ante moral hazard exercise for the particular case of microfinance institutions.
If, on the other hand, the borrowers' behavior cannot be observed, then, show that only the one with collateral can borrow.
Comment on what this exercise reveals, given the asymmetric value of financial access at different levels of wealth.
She has the option to go to a risk neutral and competitive bank in order to borrow the rest of the money that she Why Intervene in Credit Markets?
Compute the threshold w* below which the lender is unwilling to finance the project.
Now suppose the bank cannot differentiate between types. Which of the borrower types will it lend to?
Describe contexts in which it seems like a better prospect, and places in which it seems less likely to be a winning idea.
How can precautionary savings be explained under the rationality paradigm? Are precautionary savings always an optimal decision in low-income economies?
Explain briefly two reasons as to why it is nearly impossible for individuals living in rural areas to find effective crop insurance.