Determine the competitive equilibrium. In an agricultural economy with a very large population, each individual has a risk of losing her barn to a fire. The dollar value of a barn is L . Write down an expression for the expected utility of a typical participant in this scheme, keeping in mind that N is extremely large. This economy also suffers from another kind of risk, namely that of crop failure.
Crops fail with probability q .
This problem concerns the value of information. Suppose a farmer must decide whether to water his crop. Suppose that the farmer could wait to decide whether to water his crops until later in the season. Tracey has initial total wealth T , equal to 22. Part of her wealth is her motor car, which she values at C equal to 4.