annual earned income and U(W) = (W/10)0.5 is this individual’s von Neumann-Morgenstern utility index (or utility function) . This individual earned income is

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Chapter1: Making Economics Decisions
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Let W represents an individual’s annual earned income and U(W) = (W/10)0.5 is this individual’s von Neumann-Morgenstern utility index (or utility function) . This individual earned income is $49,000. This individual faces the prospect of a 20% chance of needing health care, with a price tag of $13,000. Assume this person is risk averse. Also assume that the insurance company has only claim costs and that administrative costs are $0. The maximum health insurance premium this individual is willing to pay is??

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