Question: solve two problems 20 An individual has weath w and Is afraid that an accident will occur with probability p that will cause her a

solve two problems

20 An individual has weath w and Is afraid that an accident will occur with probability p that will cause her a loss of D. The individual has to choose an amount, x, she will pay for imurance that will pay her do (for some given Mil the accident occurs Answer question 20-21. The Insurer' is expected profil Is * - Apx. Assume that A makes this poll zero, so that k - 1/p. If the individual is risk overse she optimally chooses x -, so that she is fully insurece her net wealth is the some whether or not she has an accident. OB =D 2 1 Assume That ph

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