-Assume the Information in the Table Regarding the Probability and

question 11

Multiple Choice

$\begin{array}{|l|l|l|l|l|}\hline \text { Investment } & \text { A } && \text { B } \\\hline \text { State description } & \text { Bad state } & \text { Good state } & \text { Bad state } & \text { Good state } \\\hline \text { Probability } & 0.20 & 0.80 & 0.30 & 0.70 \\\hline \text { Payoff } & 180 & 280 & 350 & ? ? \\\hline\end{array}$
-Assume the information in the table regarding the probability and payoffs of assets A and B relates to an investor who has a log utility function.What does the payoff for asset B need to be in the good state to make the investor indifferent between the two assets?

• A) \( \$ 115.05 \)
• B) \( \$ 147.69 \)
• C) \( \$ 224.53 \)
• D) \( \$ 417.25 \)

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Definitions:

Explicitly Colludes

A situation where companies or individuals openly agree to work together, often illegally, to manipulate prices or markets.

Price-and-quantity-fixing

Practices by which firms set the price and output levels to control market conditions, often regarded as anti-competitive.

Collusion

A secret or illegal cooperation or conspiracy, especially between firms, to deceive or gain an unfair advantage.

Demand Curve

The Demand Curve depicts the relationship between the price of a product and the amount of it that consumers are willing to purchase at various prices, usually sloping downward from left to right.