Labor Economics
8th Edition
ISBN: 9781260484434
Author: George Borjas
Publisher: Mcgraw-hill Higher Education (us)
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Question
Chapter 6, Problem 3RQ
To determine
The stopping rule for investments in education.
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Answer in step by step with explanation.
Don't use Ai.
Use the figure below to answer the following question. Let I represent Income when healthy, let I represent income when ill. Let E [I] represent expected income for a given
probability (p) of falling ill.
Utility
у в
ULI
income
Is
есте
IM
The actuarially fair & partial contract is represented by Point
X
× OB
A
Y
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
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