Suppose utility is V2 where V-the number of healthy vacation days in a planned 10 day vacation. Suppose a family has a 30% chance of an illness that could ruin the entire vacation, Suppose a risk neutral insurance company exists to provide vacation insurance. Suppose further that each vacation day requires a constant expenditure, and this expenditure is standard across everybody. This allows us to simplify the problem by considering all payments to be in terms of vacation days. What is the least a fair insurance company ignoring administrative and profit expenses would charge (in terms of vacation days)? a. 4 b. 3. c. d. 2

Q: risk of loss: lose 10 with probability 0.4 and lose 5 with probability 0.6. They are considering…

A: Utility denotes the satisfactions that the consumer derives when he/she purchases and uses a good or…

Q: #3. Hannah gets 50 utils from visiting her family for Thanksgiving. But there is a 1% chance that…

A: Total utility= 50 utils Chance to get virus and utility= 1% and -6000 utils

Q: Suppose a person chooses to play a gamble that is free to play. In this gamble, they have a 10%…

A: Insurance is the financial instrument that insurance firms or banks offer or sell a customer in…

Q: Suppose that Mira has a utility function given by U = 21 + 10√ī. She is are considering two job…

A: In economics, a utility function is a mathematical representation of an individual's preferences…

Q: 1. Purchasing Insurance: Suppose that the household has the utility function u(c) = log(c). The…

A: There is probability and of states of accident.

Q: Good drivers have a 32% chance, and bad drivers have a 68% chance of getting into an accident. A car…

A: Given  Probability that a bad driver have a chance of accident = 68% p(accident)=0.68q(not having…

Q: Suppose the probability that Recall Scarlett is sued is .1 and her income is 1000. In the case, she…

A: Demand refers to the desire of consumers to buy goods and services at certain prices. Demand can…

Q: Suppose a company offers a standard insurance contract with a premium (r) of $2,000 and a payout (q)…

A: Given that: Premium (r) = $2000Payout (q)= $10000Healthy state Income Ih = $70000Sick state Income…

Q: Suppose a household has the following lifetime utility function: U = c1/2 + ẞc¹/2t+1 A) Find…

A: DISCLAIMER  “Since you have asked multiple questions, we will solve the first three question for…

Q: ₂0.5 Wilfred's expected utility function is px0.5 + (1 − p)x2.5, where p is the probability that he…

A:

Q: 4. An individual's Bernoulli utility function is u(w) = √w, and the individual has initial wealth…

A: U=W0.5Probability of a healthy person developing health issues =0.3Probability of an unhealthy…

Q: Consider an individual who gets a utility of u(x) - x^1/2 from his total wealth x. Amsume that he…

A:

Q: 6. Are the following utility functions consistent with the axioms of the expected utility theorem?…

A: the utility function measures the welfare or satisfaction of a consumer as a function of the…

Q: Consider two individuals, Dani and Tom. Dani's utility function is given by U(c)=In(c), where c is…

A: The aim of this question is to show the Tomand's utility function is a square showing increasing…

Q: Can you answer these three parts please? I am super confused. Thank you :) Part A. Austin pays…

A: Risk is defined as the situation of winning or losing something worthy. It can be measured and…

Q: Suppose Diane's utility function is U=VIncome . Diane earns an income of 00, but there is a 15%…

A: The premium of insurance is decided based on the expected values.

Q: A farmer can grow wheat, or potatoes, or both. If the weat her is good, an acre of land yields a…

A: The expected payoff of the choice is the weightage average of all possible payoffs using the…

Q: Continue from Question 16: You make $20,000 per year, and there's a $100 insurance expense to…

A: In decision theory, expected utility is a metric that expresses the average level of satisfaction or…

Q: COVID-19 has caused several shortages: paper products, hand sanitizer, and even nurses. When a…

A: We are going to use present value concept to answer this question. Suppose we have future cash flows…

Q: Consider the lottery that assigns a probability r of obtaining a level of consumption CH and a…

A: Risk premium is the amount which a consumer is willing to pay in order to avoid a risky event. RP =…

Q: When Shalini is sick, she values wealth according to the utility function US(w) = ln (w). When she…

A: Insurance refers to the provision of money or other facilities such as health facilities in cases of…

Q: 1. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser…

A: Given: Utility function : u = x1/2  She initially have income of $90,000 and there 1% chance that…

Q: You are trying to decide between rescuing a puppy or an older dog. You decide to try to assign some…

A: Utility when the dog chews furniture = 0.1 Utility when dog goes on hike = 0.8  Expected Utility =…

Q: Using the 3-point curved line drawing tool, draw a utility function for income that describes a…

A: Expected utility is a concept in decision theory and economics that quantifies how individuals make…

Q: Vhat is the behavior of a person with the following utility function? 1 0.8 0.6 5 0.4 0.2 $0 $50…

A: Each and every investment is associated with risk. Thus a person taking a risk can be of three types…

Q: John is deciding whether to exert effort (e = 1) to avoid an accident at work or not exert any…

A: Given information Utility of money=I0.5 Total utility=I0.5-c(e) e=1 when exert effort at work and…

Q: Tess and Lex earn $40,000 per year and all earnings are spent on consumption (c).  Tess and Lex both…

A: Annual Income = 40000Probability of adverse event for tess = 1%Probability of adverse event for Lex…

Q: QUESTION 5 A consumer has utility u (1)=√1 and income $1,600. The cost of going to the doctor is…

A: Utility function can be defined as the measure of welfare or satisfaction for any consumer as the…

Q: Anita bought a new scooter for $500. She is deciding whether she should insure her scooter against…

A: Price of the new scooter=$500 1 out of the 10 scooters is stolen So the probability of…

Q: Billy's income is equal to / = 100 and his utility function is U == 12, There is a 10% chance that…

A: Given, Income, I = 100 The utility function, U = I2 The probability of accident or damage= p = 10% =…