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The conventional wisdom for urban economic development is: "Don't put all your eggs in one basket. Diversify the economy." To describe the idea of diversification, consider old McDonald, who must carry a dozen eggs from the barn to the house. The ground between the barn and the house is slippery, so there is a 50 percent chance that McDonald will slip on a given trip and break all the eggs in his basket. Consider two strategies: a one-basket strategy (a single trip with all 12 eggs) and a two-basket strategy (two trips, with 6 eggs per trip).

a. List all of the possible outcomes under each of the strategies.b. What is the expected number of delivered (unbroken) eggs under eachstrategy?c. What are the trade-offs between the two strategies? If you were McDonald,which strategy would you adopt?d. What are the lessons for economic development strategies?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M959517

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