Use the figure below to answer the following question. Let lμ represent Income when healthy, let Is represent income when ill. Let E[I] represent expected income for a given probability (p) of falling ill. Utility A 0000 B ELB Point B represents C In U(I) nome actuarially unfair & full contract uninsurance actuarially fair & full contract actuarially fair & partial contract

Use the figure below to answer the following question. Let lμ represent Income when healthy, let Is represent income when ill. Let E[I] represent expected income for a given probability (p) of falling ill. Utility A 0000 B ELB Point B represents C In U(I) nome actuarially unfair & full contract uninsurance actuarially fair & full contract actuarially fair & partial contract

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

5
Typed plezz asap...
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,…
Use the figure below to answer the following question. Let In represent Income when health, let Is represent income when ill. Let E[I] represent expected income. Point D represents Utility Is у в an actuarially fair and full contract an actuarially fair and partial contract X E[1], the utility from Expected income with no insurance an actuarially unfair and full contract an actuarially unfair and partial contract с IH U(I) Prome
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
Persons, À and B, expectel utility and B, dp (m) = In (wt). bo th risk awera. A's funition is Un Cm) eh (wt), ln (ut). are Who is more risk averse ?
What distribution is appropriate for simulating the event of flipping a coin? O triangular O discrete uniform binomial O continuous uniform
The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. Firm Table 10-5 A B с D Marginal Cost to Eliminate (Dollars) First Unit Second Unit Third Unit Fourth Unit 54 67 82 107 57 68 86 108 54 66 107 62 73 111 82 91 Refer to Table 10-5. If the government wanted to reduce pollution from 16 units to 6 units, which of the following fees per unit of pollution would achieve that goal? O a. $68 O b. $67 O c. $81 O d. $83