Consider the following information: Patients who are given Treatment A live for one year in Health State q = 0.8 and certainly live for another year in Health State q = 0.5. Patients who are given Treatment B live for one year in Health State q = 1.0 and then either die with probability 70% or live for another year in Health State q = 1.0 with probability 30%. Which of the following statement is TRUE regarding the abovementioned information? O If the second year is discounted at rate r = 0.10 then the expected present value QALYS for treatment A and B is 1.35 and 1.33, respectively. OIf the

Consider the following information: Patients who are given Treatment A live for one year in Health State q = 0.8 and certainly live for another year in Health State q = 0.5. Patients who are given Treatment B live for one year in Health State q = 1.0 and then either die with probability 70% or live for another year in Health State q = 1.0 with probability 30%. Which of the following statement is TRUE regarding the abovementioned information? O If the second year is discounted at rate r = 0.10 then the expected present value QALYS for treatment A and B is 1.35 and 1.33, respectively. OIf the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The accompanying table shows the results from a test for a certain disease. Find the probability of selecting a subject with a negative test result, given that the subject has the disease. What would be an unfavorable consequence of this error? The probability is (Round to three decimal places as needed.) What would be an unfavorable consequence of this error? O A. The test would be shown to be not effective. OB. The test would be shown to be not reliable. O C. The subject would experience needless stress and additional testing. O D. The subject would not receive treatment and could spread the disease. The individual actually had the disease Yes Positive 343 Negative 10 No 9 1148
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Now consider a different insurance company that does not have the inclination to tailor contracts specifically to individuals. Instead, it will offer a “standard contract” with the premium r =$100 and payout q=$500 to anyone who will purchase it. a. Peter has healthy-state income IH = $500 and sick-state income IS = $0. He has probability of illness p=0.1. Is the standard contract fair and/or full for Peter? If he ends up getting sick, what will his final income be? b. Tim has IH = $500 and IS = $0, but a probability of illness p = 0.2, higher than Peter’s. Is the standard contract fair and/or full for Tim? How does purchasing the standard contract affect Tim’s expected income?c. Jay has IH =$1, 000 and IS =$0, with probability of illness p=0.2. Is the standard contract fair and/or full for Jay?d. Suppose there is a customer named Ronald for whom the standard contract is partial and actuarially unfair in the insurance company’s favor. Give a set of possible values for Ronald’s IH, IS,…
d e and f please
Question 4 Suppose that there is a 10% chance Ja'Marr is sick and earns $10,000, and a 90% chance he is healthy and will earn $70,000. Suppose further that his utility function is the following (utility = square root of income) U (I) = VIncome Ja'Marr's expected income is O $60,000 O $70,000 $40,000 O $64,000
buy? 20 None of the answers is correct. 3 80 40 40 3 The decision maker has utility function U(z) = 2 ln(2). With 50% probability x-20 and with 50% x 100. The decision maker can buy insurance. For each unit of insurance they buy the get $1 if x-20 realizes. A unit of insurance costs $0.75. How many units of insurance does the decision maker buy? 80/3 40 40/3 20 None of the answers is correct. O
Question 5 Now, instead assume an individual has income of $100,000, a 10% chance of incurring a $75,000 accident, and a 20% chance of a $10,000 accident (and a 70% chance of no accident). The utility function is represented by U = C. What premium would be charged to provide full insurance coverage against all adverse states of the world? ers 9,500 9,500 (with margin: 0)
Suppose that one course of treatment costs $500,000. If given to patient A, it will increase life expectancy by one month; for patient B, by two months; for patient C, by three months; and for patient D, by four months. The marginal cost per additional year of life for the patient most likely to benefit is and the marginal cost per additional year of life for the patient least likely to benefit is O $500,000; $2 million $1.5 million; $6 million $200,000; $500,000 O $2 million; $500,000 $6 million; $1.5 million
Consider an individual with an expected utility function of the form u(w) = √wwhere wrep-resents this individual’s wealth. This individual currently has wealth of $100. This individualfaces a risk of losing $64 with a probability of (1/2). The maximum price that this individualwould pay for insurance that covers the entire $64 loss is?