Question: Don't copy from other answers.... internet Suppose your utility function is U=3Y2. Your labor income (Y) when you are well is $6000. There is a

Don't copy from other answers.... internet

Suppose your utility function is U=3Y2. Your labor income (Y) when you are well is $6000. There is a 80% chance that you will get sick (and a 20% chance that you will stay well) which will cost you all of your income in lost earnings.

(a) Are you risk averse, risk loving or risk neutral? Explain [show all workings]

(b) What is the certainty equivalent of your income distribution associated with getting sick and staying well? [show all workings]

(c) What is the maximum premium you would be willing to pay for health insurance to cover the cost of treatment in the event you fall sick? [show all workings]

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