Let Y represent the amount an individual spends on a trip. The individual's utility is a function of how much she actually spends on the trip, given by U(Y) = (In Y) * 1000. The individual plans to spend $10,000 on the trip, but there is a possiblity that some of the money will be lost. Suppose the individual's expected utility for the trip of 9,131.32, without insuring against the possible loss of money. The maximum whole-dollar amount this individual would spend to insure against the loss of money would be $[p]. (NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero andtrailing zeros when needed. Use a period for the decimal separator and a comma to separate groups of thousands.)

Let Y represent the amount an individual spends on a trip. The individual's utility is a function of how much she actually spends on the trip, given by U(Y) = (In Y) * 1000. The individual plans to spend $10,000 on the trip, but there is a possiblity that some of the money will be lost. Suppose the individual's expected utility for the trip of 9,131.32, without insuring against the possible loss of money. The maximum whole-dollar amount this individual would spend to insure against the loss of money would be $[p]. (NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero andtrailing zeros when needed. Use a period for the decimal separator and a comma to separate groups of thousands.)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.1P

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