Choice under uncertainty. Consider a coin-toss game in which the player gets $30 if they win, and $5 if they lose. The probability of winning is 50%. (a) Alan is (just) willing to pay $15 to play this game. What is Alan’s attitude to risk? Show your work. (b) Assume a market with many identical Alans, who are all forced to pay $15 to play this coin-toss game. An insurer offers an insurance policy to protect the Alans from the risk. What would be the fair (zero profit) premium on this policy? i need help with question B please.
Choice under uncertainty. Consider a coin-toss game in which the player gets $30 if they win, and $5 if they lose. The probability of winning is 50%. (a) Alan is (just) willing to pay $15 to play this game. What is Alan’s attitude to risk? Show your work. (b) Assume a market with many identical Alans, who are all forced to pay $15 to play this coin-toss game. An insurer offers an insurance policy to protect the Alans from the risk. What would be the fair (zero profit) premium on this policy? i need help with question B please.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Choice under uncertainty.
Consider a coin-toss game in which the player gets $30 if they win, and $5 if they lose. The
probability of winning is 50%.
(a) Alan is (just) willing to pay $15 to play this game. What is Alan’s attitude to
risk? Show your work.
(b) Assume a market with many identical Alans, who are all forced to pay $15 to
play this coin-toss game. An insurer offers an insurance policy to protect the
Alans from the risk. What would be the fair (zero profit) premium on this
policy? i need help with question B please.
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