Economics: Private and Public Choice (MindTap Course List)
15th Edition
ISBN: 9781285453538
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 17, Problem 8CQ
To determine
Explain the influence of high-income countries on the less-developed countries.
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Suppose that there is a 25% chance Riju is injured and earns $180,000, and a 75% chance she stays healthy and will earn $900,000. Suppose further that her utility function is
the following:
U = (Income) ³.
Riju's utility if she earns $180,000 is _ and her utility if she earns $900,000 is.
X
56.46; 169.38
56.46; 96.55
96.55; 56.46
40.00; 200.00
169.38; 56.46
Use the figure below to answer the following question. Let là 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
&
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естве
IH
S
Point D represents
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actuarially fair & full contract
actuarially fair & partial contract
O actuarially unfair & full contract
uninsurance
income
Suppose that there is a 25% chance Riju is injured and earns $180,000, and a 75% chance she stays healthy and will earn $900,000. Suppose further that her utility function is the
following:
U = (Income).
Riju is risk. She will prefer
(given the same expected income).
averse; no insurance to actuarially fair and full insurance
lover; actuarially fair and full insurance to no insurance
averse; actuarially fair and full insurance to no insurance
neutral; he will be indifferent between actuarially fair and full insurance to no insurance
lover; no insurance to actuarially fair and full insurance
Chapter 17 Solutions
Economics: Private and Public Choice (MindTap Course List)
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