Johnny owns a house that would cost $100,000 to replace should it ever be destroyed by fire. There is a 0.1% chance that the house could be destroyed during the course of a year. Johnny's utility function is U = W0.5
How much would fair insurance cost that completely replaces the house if destroyed by fire? Assuming that Johnny has no other wealth, how much would Johnny be willing to pay for such an insurance policy? Why the difference?
Fair insurance would cost (0.001 ? $100,000 ) = $100. Johnny's expected utility without insurance equals (.001 ? 00.5 ) + (.999 ? 100,0000.5 ) = 315.91. He can receive this level of utility with certainty if he had risk-free wealth of $99,800.10. Thus he is willing to pay $199.90 for insurance. He is willing to pay more than the fair price because he is risk averse.
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In the above table, the balance on the capital account for Country X is ________ billion dollars
A) -80 B) +35 C) +80 D) -35
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The workers in Country A should specialize in __________________ because they possess the ___________________ in the production of that good.
A. bananas; comparative advantage B. tomatoes; comparative advantage C. bananas; absolute advantage D. tomatoes; absolute advantage
The labor supply curve will shift to the right under which of the following conditions?
a. other things being equal, workers are willing to supply more hours of labor each week b. new workers enter the labor market c. a new law relaxes immigration quotas d. all of the above
Which of these has the most elastic demand?
A. Filet Mignon steak B. Bread C. Heart medicine D. Insulin (diabetes medicine)