Anita bought a new scooter for $500. She is deciding whether she should insure her scooter against theft. She has recently read in the news that one out of 10 scooters are stolen in her town. She can buy scooter theft insurance at the price of 12 cents per $1 of insurance. How much insurance will Anita buy if her utility function is U(C) = 2C + 100?

Q: Is the decision to buy pet insurance strictly an economic decision? Explain.

A: An economic decision is a decision when people have to choose between options due to scarcity of…

Q: 1. Individual Problems 20-1 Your product fails about 2% of the time, on average. Some customers…

A: The possibility that a party did not enter into a contract in good faith or providing false…

Q: Suppose that there is a 20% chance Malik is injured and earns $100,000, and an 80% chance he stays…

A: Insurance is a legal agreement between a person and an insurance provider whereby the person agrees…

Q: Use the figure below. Bob and Nancy have the same income and total utility. Nancy will be willing to…

A: A higher risk averse individual always ready to pay more money as risk premium to convert a gamble…

Q: You own a house worth $700,000 that is located on a river. If the river floods moderately, the house…

A: Estimated Cost: The estimated cost is the projected amount that may be arouse in completing a…

Q: Gary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary’s boat…

A: Not taking the gamble gives the $80 as an utility to gary.

Q: An individual has 40,000 in income per year. The person will get sick with probability 0.1. If he…

A: A. To check if this individual is risk-neutral, risk-loving, or risk-averse we will first plot the…

Q: mpany of 5000. Safe drivers have a lower probability of accidents with óf $: áfé dřivers have a…

A: Insurance is a policy, addressed by an approach, where an individual or element gets monetary…

Q: 1)Describe an example of moral hazard that we may run into in the real world. Think of something…

A: Moral hazard in economics refers to a situation where one party takes risks because the potential…

Q: 4. Suppose co = 0 and c1 = 70, 000. Is insurance at coverage level z > 0 fair insurance? What…

A: 4.  For any z>0, the cost of insurance is C(z)=70000z The expected value of payout is given by…

Q: Sadija has a concave utility function of U(W) = In(W). She has inherited a ring from a relative, but…

A: Part a: ln (W) = 1/3 ln(6000) + 2/3ln(3000) ln(W) = 8.69951474821(1/3) + 8.00636756765(2/3) ln(W) =…

Q: You start an insurance company as your first entrepreneurial venture after graduation.  Your main…

A: Expected value is the value that is calculated by taking a summation of the products of the outcomes…

Q: Draw a utility function over income u( I) that describes a man who is a risk lover when his income…

A: In this question we have to find out the why utility function might reasonably with the help of the…

Q: Fiona has von Neumann-Morgenstern utility function u(x) = VT and initial wealth 640, 000. She faces…

A: Risk-averse people will not be willing to take risks. Given: u(x)=x1/2  Initial Worth = 640,000…

Q: the video link is: https://www.youtube.com/watch?v=aqEz6kvXhc8please give me detailed solutions and…

A: a. The difference between Jill's expected utility with and without insurance is her risk premium, or…

Q: 5. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser…

A: The Von Neumann-Morgenstern (VNM) utility index is an index that measures an individual's preference…