Bob's farm harvests corns worth 89 dollars (and nothing else). In each year, there is a 30% chance that a storm will attack and leaves him with only 30 dollars worth of the corns. Bob's preferences over wealth are represented by U = √w. What is the maximum that Bob is willing to pay for full insurance (in unit of thousand dollars)? Please round your answer to the nearest integer.

Bob's farm harvests corns worth 89 dollars (and nothing else). In each year, there is a 30% chance that a storm will attack and leaves him with only 30 dollars worth of the corns. Bob's preferences over wealth are represented by U = √w. What is the maximum that Bob is willing to pay for full insurance (in unit of thousand dollars)? Please round your answer to the nearest integer.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter29: Interest, Rent, And Profit

Section29.4: The Entrepreneur

Problem 1ST

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