Question: Lucy the manager of the medical test firm Dubrow Labs

Lucy, the manager of the medical test firm, Dubrow Labs, worries about being sued for botched results from blood tests. If it isn’t sued, the firm expects to earn a profit of 100, but if it is successfully sued, its profit will be only 10. Lucy believes the probability of a successful suit is 5%. If fair insurance is available and Lucy is risk averse, how much insurance will she buy?


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  • CreatedNovember 13, 2014
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