Adam presently makes about $40,000 of interest income per year. He realizes that there is about a 5 percent probability that he may suffer a heart attack. The cost of treatment will be about $20,000 if a heart attack occurs. A. Calculate Adam's expected utility level without any health insurance coverage. B. Calculate Adam's expected income without any insurance coverage. C. Suppose Adam must pay a premium of $1,500 for health insurance coverage with BlueCross Blue Shields insurance. Would he buy the health insurance? Why or why not?
Adam presently makes about $40,000 of interest income per year. He realizes that there is about a 5 percent probability that he may suffer a heart attack. The cost of treatment will be about $20,000 if a heart attack occurs. A. Calculate Adam's expected utility level without any health insurance coverage. B. Calculate Adam's expected income without any insurance coverage. C. Suppose Adam must pay a premium of $1,500 for health insurance coverage with BlueCross Blue Shields insurance. Would he buy the health insurance? Why or why not?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Adam presently makes about $40,000 of interest income per year. He realizes that there is about
a 5 percent probability that he may suffer a heart attack. The cost of treatment will be about
$20,000 if a heart attack occurs.
A. Calculate Adam's expected utility level without any health insurance coverage.
B. Calculate Adam's expected income without any insurance coverage.
C. Suppose Adam must pay a premium of $1,500 for health insurance coverage with
BlueCross Blue Shields insurance. Would he buy the health insurance? Why or why not?
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