Now assume that Lucy's benefit function is W(L) = La/a; otherwise everything is the same as in

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Now assume that Lucy's benefit function is W(L) = La/a; otherwise everything is the same as in Problem 8 (Her utility function is then

her marginal utility of lemonade if not robbed is

and her marginal utility of lemonade if robbed is

Find a formula for the amount of insurance she purchases as a function of the value of a. Determine that amount, as well as the value of that insurance to Lucy for the following values of a: -0.2, 0.2, and 0.6.

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Microeconomics

ISBN: 978-1118572276

5th edition

Authors: David Besanko, Ronald Braeutigam

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Question Posted: Mar 18, 2016 04:50 AM

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Now assume that Lucy's benefit function is W(L) = La/a; otherwise everything is the same as in

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MUN = 44

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Assume that L N is plotted along the horizontal axis and L R is plotted along the vertical ...View the full answer

Microeconomics

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