1. The value of insurance Suppose you face a choice between a certain income of $4,000, or a 50-50 chance of income of $2,000 or $6,000. Suppose you prefer the 50-50 chance of $2,000 or $6,000. True or False: You are not risk averse. True False Suppose that a disease affects 1% of the population and that everyone is equally likely to get the disease. Treatment for this disease costs $34,000. Assume that this disease, and necessary treatment, represent the only healthcare costs in this population. to pay the expected cost of healthcare with certainty, rather than The expected cost of healthcare is s If people take on the 1% risk of having to pay the full cost of the treatment, they are risk averse.

1. The value of insurance Suppose you face a choice between a certain income of $4,000, or a 50-50 chance of income of $2,000 or $6,000. Suppose you prefer the 50-50 chance of $2,000 or $6,000. True or False: You are not risk averse. True False Suppose that a disease affects 1% of the population and that everyone is equally likely to get the disease. Treatment for this disease costs $34,000. Assume that this disease, and necessary treatment, represent the only healthcare costs in this population. to pay the expected cost of healthcare with certainty, rather than The expected cost of healthcare is s If people take on the 1% risk of having to pay the full cost of the treatment, they are risk averse.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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