Your utility function is M. Your current wealth is $400,000. There is a 0.00001 probability that your

Question:

Your utility function is √M. Your current wealth is $400,000. There is a 0.00001 probability that your legal liability in an automobile accident will reduce your wealth to $0. What is the most you would pay for insurance to cover this risk?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Microeconomics and Behavior

ISBN: 978-0078021695

9th edition

Authors: Robert Frank

See More Books

Question Posted: Dec 12, 2014 10:21 AM

See More Questions

Your utility function is U = ln(2C) where C is the amount of consumption you have in any given period. Your income is $40,000 per year and there is a 2% chance that you will be involved in a...
What is the maximum amount you would pay for an asset that generates an income of $ 250,000 at the end of each of five years if the opportunity cost of using funds is 8 percent?
Lian is injured in an automobile accident this year. She is hospitalized for 4 weeks and misses 3 months of work after getting out of the hospital. The costs related to her accident are...
Once an LLC has engaged in a dissolution procedure, the business does not stop immediately. True/False
Given the following variance-covariance matrix for three securities, as well as the percentage of the portfolio for each security, calculate the portfolio's standard deviation. SecurityA 459 -211 112...
Suppose a ten-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for a price of $1034.74. a. What is the bonds yield to maturity (expressed as an APR with semiannual...
What is dividend?
What are the manager's roles in a career management system? Which role do you think is most difficult for the typical manager? Which is the easiest role? List reasons why managers might resist...
Using the BCG Matrix In the following mini-case study, you are required to categorize the corporation's business portfolio into the four boxes of the BCG (Boston Consulting Group) model. You then...
A recent study was aimed at determining whether people with increased workers' compensation stayed off the job longer than people without the increased benefits. Suppose that the average time off per...
Suppose your current wealth, M, is 100 and your utility function is U = M2. You have a lottery ticket that pays $10 with a probability of 0.25 and $0 with a probability of 0.75. What is the minimum...
You are searching for a high wage from a wage distribution that is uniform on the interval (5, 8). The cost of each search is 0.06. What is the smallest wage you should accept?
In Exercises 1 and 2, (u, v) defines an inner product on R2, where Find a symmetric matrix A such that (u, v) = uT Av. 1. (u, v) = 4u1v1 + u1v2 + u2v1 + 4u2v2 2. (u, v) = u1v1 + 2u1v2 + 2u2v1 + 5u2v2...
According to Willliamson our standard neoclassical economic objective should lead us to study real wage convergence, rather than output per person convergence. Describe exactly what is meant by the...
(a)What drives the development of transportation routes and technology? (b)What economic or social development is driven by transportation developments?
Pick 3 of the listed questions and answer with significant and creative thoughts. -Would you accept payment in a currency that was not issued by the local government? -Which digital payments...
The National Bank of Fragana implements monetary policies that help to control currency supply and maintain price stability. When there is a demand, the bank prints more money. This increases...
A natural monopolist has total costs C(Q) = 500 + Q and faces market demand Q = 2000 - 2P Find CS, PS, and total surplus in a. CS = * (875 - 750) * 250 = 15625 PS = * (750 - 750) * 250 = 0 TS = CS +...
Describe a rainwater collection/harvesting systems.
Controls can be identified based on their function. The functions are preventive, detective, and corrective. A. True B. False
Indicate true or false for the following statements. If false, specify what change will make the statement true. _______________________ The F distribution is symmetric and has a mean of 0.
An economy is described by the following equations: (L02) C = 1,800 + 0.6(Y - T) P = 900 G = 1,500 NX = 100 T = 1,500 Y* = 9,000 a. Find a numerical equation linking planned aggregate expenditure to...
For the economy described in Problem 3: (L03) a. Construct a table like Table 22.1 to find short-run equilibrium output. Consider possible values for short-run equilibrium output ranging from 8,200...
For the economy described in Problems 3 and 4, take as given that the multiplier for this economy is 2.5. Find the effect on short-run equilibrium output of (L04) a. An increase in government...
What if Scenrio May stays as planned but that your supplier tells you that you will not receive any shipments for the rest of the year for the following games: boggle, telestrations, ticket to ride,...
enjamin and Nellie Barker have taxable income of $120,000. Several of the items used to calculate their taxable income included W-2 wages of $150,000, and Net Long-Term Capital Losses of $6,000....
Betty Lou sold a rental condominium that she had owned for several years. Her records reveal the following: Item to be Allocated Total Personal Property Building Land Rights Original purchase price...

Your utility function is M. Your current wealth is $400,000. There is a 0.00001 probability that your

Question:

Step by Step Answer:

EU without insurance 099999 400...View the full answer

Microeconomics and Behavior

Students also viewed these Economics questions