A risk-averse individual experiences an adverse event with probability of 2% (0.02) that costs $1000. How much insurance coverage will the individual purchase if premiums are actuarily fair? a-some amount more than $1000b-$1000c-$0d-some amount greater than $0, but less than $1000 The government of Stratospheria is currently inviting investors to bid for the exclusive right to provide cable television service to its residents. The market demand for this service is P=55-0.01Q, where Q is the number of households that would subscribe to the cable service and P is the monthly fee charged to the subscribers. The associated marginal revenue curve is MR=55-0.02Q. Fun Cable Company is interested in bidding for the right to provide cable service in Stratospheric. It has a constant average and marginal cost of RM5 for providing cable service to each household.2.4) What is the most Fun Cable Company would bid for the franchise?2.5) At what level of output (number of households) is Fun Cable Company's total revenue maximized?

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Answered: A risk-averse individual experiences an…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A risk-averse individual experiences an adverse event with probability of 2% (0.02) that costs $1000. How much insurance coverage will the individual purchase if premiums are actuarily fair?

a-some amount more than $1000

b-$1000

c-$0

d-some amount greater than $0, but less than $1000

The government of Stratospheria is currently inviting investors to bid for the exclusive right to provide cable television service to its residents. The market demand for this service is P=55-0.01Q, where Q is the number of households that would subscribe to the cable service and P is the monthly fee charged to the subscribers. The associated marginal revenue curve is MR=55-0.02Q. Fun Cable Company is interested in bidding for the right to provide cable service in Stratospheric. It has a constant average and marginal cost of RM5 for providing cable service to each household.

2.4) What is the most Fun Cable Company would bid for the franchise?

2.5) At what level of output (number of households) is Fun Cable Company's total revenue maximized?

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