1. free-trade benefits
in addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. consider the following scenario:
without free trade, rooby has market power as a local producer. once free trade is implemented in the local economy, rooby is no longer able to raise its prices above competitive levels.
the previous scenario represents which of the following benefits of free trade?
increased variety of goods
enhanced flow of ideas
increased competition
lower costs through economies of scale

Your company is starting a new r& d initiative: a development of a new drug that dramatically reduces the addiction to smoking. the expert team estimates the probability of developing the drug succesfully at 60% and a chance of losing the investment of 40%. if the project is successful, your company would earn profits (after deducting the investment) of 9,000 (thousand usd). if the development is unsuccessful, the whole investment will be lost -1,000 (thousand usd). your company's risk preference is given by the expected utility function: u(x) v1000 +x, where x is the monetary outcome of a project. calculate the expected profit of the project . calculate the expected utility of the project . find the certainty equivalent of this r& d initiative . find the risk premium of this r& d initiative e is the company risk-averse, risk-loving or risk-neutral? why do you think so?