Can you answer these three parts please? I am super confused. Thank you :) Part A. Austin pays $10,500 per year to an insurance company in return for its promise to pay part of his family's medical bills. Austin must pay the first $1,000 on his own before the insurance kicks in. The $1,000 is Austin's: a. risk b. deductible c. premium d. expected utility Part B: Suppose Austin earns $100,000 if he is healthy, and _____ if he falls ill. Suppose further that he has a __% chance of falling ill. If Austin were to purchase full insurance, the payout would be equal to $20,000. The actuarially fair premium for this payout would be equal to $400. a. $80,000; 2% b. $120,000; 2% c. $80,000; 0.4% d. $100,000; 20% e. $120,000; 0.4% Part c: suppose Austin (who is now your employer) offers a new health insurance benefit that covers orthodontics (things like braces, invisaline) for employees and their family members. Suppose further that you are aware that you've noticed your kids have misaligned teeth and bite patterns. After looking over the benefits, you decide to buy the new insurance benefit. This is an example of ______. a. ex ante moral hazard b. ex post moral hazard c. adverse selection
Can you answer these three parts please? I am super confused. Thank you :)
Part A. Austin pays $10,500 per year to an insurance company in return for its promise to pay part of his family's medical bills. Austin must pay the first $1,000 on his own before the insurance kicks in. The $1,000 is Austin's:
a. risk
b. deductible
c. premium
d. expected utility
Part B:
Suppose Austin earns $100,000 if he is healthy, and _____ if he falls ill. Suppose further that he has a __% chance of falling ill. If Austin were to purchase full insurance, the payout would be equal to $20,000. The actuarially fair premium for this payout would be equal to $400.
a. $80,000; 2%
b. $120,000; 2%
c. $80,000; 0.4%
d. $100,000; 20%
e. $120,000; 0.4%
Part c:
suppose Austin (who is now your employer) offers a new health insurance benefit that covers orthodontics (things like braces, invisaline) for employees and their family members. Suppose further that you are aware that you've noticed your kids have misaligned teeth and bite patterns. After looking over the benefits, you decide to buy the new insurance benefit. This is an example of ______.
a. ex ante moral hazard
b. ex post moral hazard
c. adverse selection
Risk is defined as the situation of winning or losing something worthy. It can be measured and quantified using theoretical models.
Uncertainty is a condition where there is no knowledge about future events.
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