An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he does get sick, the medical bills will total 30,000. The following tables shows the utility derived from certain amounts of income: Income Utility 40,000 200 |37,000 195 35,000 190 30,000 170 |20,000 140 10.000 100 A. Is this person risk neutral, risk loving or risk averse? Why? B. Considering the probability of illness, what is the expected income without insurance? Show your work.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he
does get sick, the medical bills will total 30,000. The following tables shows the utility derived
from certain amounts of income:
Income Utility
40,000 200
|37,000 195
35,000 190
30,000 170
|20,000 140
10.000 100
A. Is this person risk neutral, risk loving or risk averse? Why?
B. Considering the probability of illness, what is the expected income without
insurance? Show your work.
Transcribed Image Text:An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he does get sick, the medical bills will total 30,000. The following tables shows the utility derived from certain amounts of income: Income Utility 40,000 200 |37,000 195 35,000 190 30,000 170 |20,000 140 10.000 100 A. Is this person risk neutral, risk loving or risk averse? Why? B. Considering the probability of illness, what is the expected income without insurance? Show your work.
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