5need this ASAP Insurance DiagramTotal UtilityU(W-L)WealthP(W-L)+(1-p)WExpectedW-LIf an insurance company charges more than the actuarially fair(TRUE/FALSE).premium, people will not buy insurance FMatch each of the terms on the left to the correct letter in the figure.For the terms not matched to a letter in the diagram - select option 7.False1. AU[p(W-L)+(1-p)W]2. B[U(W-L)+(1-p)W] False1. AU[p(W-L)+(1-p)W]2. B[U(W-L)+(1-p)W]3. СTruepU(W-L)+(1-p)U(W)4. DAmount below the5. Eactuarially fair premiumwilling to paypU(W+L)-(1-p)U(W)6. FAmount above theactuarially fair premiumwilling to pay7. This term has noassociated letter inthe diagram.Actuarially fair premium =expected lossU(W)>

* ANSWER :- By using given data the matching are given below

Answered: Insurance Diagram Total Utility E…

Insurance Diagram Total Utility E U(W-L) B W-L P(W-L)+(1-p)W Expected If an insurance company charges more than the actuarially fair Wealth premium, people will not buy insurance F (TRUE/FALSE).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.4P

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Question

5 need this ASAP

Insurance Diagram
Total Utility
U(W-L)
Wealth
P(W-L)+(1-p)W
Expected
W-L
If an insurance company charges more than the actuarially fair
(TRUE/FALSE).
premium, people will not buy insurance F
Match each of the terms on the left to the correct letter in the figure.
For the terms not matched to a letter in the diagram - select option 7.
False
1. A
U[p(W-L)+(1-p)W]
2. B
[U(W-L)+(1-p)W]

False
1. A
U[p(W-L)+(1-p)W]
2. B
[U(W-L)+(1-p)W]
3. С
True
pU(W-L)+(1-p)U(W)
4. D
Amount below the
5. E
actuarially fair premium
willing to pay
pU(W+L)-(1-p)U(W)
6. F
Amount above the
actuarially fair premium
willing to pay
7. This term has no
associated letter in
the diagram.
Actuarially fair premium =
expected loss
U(W)
>

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