Suppose that the government subsidizes housing expenditures…

Suppose that the government subsidizes housing expenditures of low-income families by providing a dollar-for-dollar subsidy to a family’s housing expenditure.  The Cunninghams qualify for this subsidy and spend a total of $500 per month on housing: they spend $250 of their own and receive a government subsidy of $250.  Recently, a new policy has been proposed that would provide each low income family with a lump sum transfer of $250 which can be used for housing or other goods.   Using a graph, demonstrate whether the Cunninghams would prefer the current program, the proposed program, or would be indifferent between the two.    

Risk-neutral Icarus Airlines must commit now to leasing 1, 2…

Risk-neutral Icarus Airlines must commit now to leasing 1, 2, or 3 new airplanes. It knows with certainty that on the basis of business travel alone, it will need at least 1 airplane.  The marketing division says that there is a 50% chance that tourism will be big enough for a second plane only.  Otherwise, tourism will be big enough for a third plane.  This, plus revenue information, yields the following table:   Planes                Tourism Revenue                   Expected              Leased            Light                Heavy                 Profit        2                      $90 million      $30 million         $60 million               3                      $10 million      $140 million       $75 million   What is the value to Icarus Airlines of complete information? Make sure you explain the calculations.