Question

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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