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The kingdom of Arendelle has equal numbers of two types of workers, domestic servants and ice sellers, which both earn $1,000 per week. All workers face a risk of being laid off next year due to bad market conditions, in which case they will have an income of only $250/week from an alternative part-time job. Domestic servants have a 10% probability of being laid off, and ice sellers have a 30% probability. All have the same utility function: U = ln(C).
a. Suppose that workers would like to insure against being laid off. If insurers can offer different insurance contracts to each type of worker, what will be the actuarially fair premiums for full insurance for each group? (Assume that full insurance pays a benefit of $1000 per week, so that part time work is not necessary.)
b. Explain why a private market for unemployment insurance is unlikely to exist.
In the early 1980s, Michael Milken developed the low-grade bond (or junk bond) for corporate finance. Throughout the 1980s, these were used by firms to finance leveraged buyouts (purchasing a controlling interest in a company’s shares using money rai..
given the following hypothetical data in millions of naira1.gross private domestic investmentn592.contributors for
Economists have estimated that cigarette smoking declines by 4 percent for every 10 percent increase in cigarette price. Several states have increased taxes by 100 percent on cigarettes to pay for improvements in education. Does this policy make sens..
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Suppose the keynesian demand for money is given by L(Y,r)=y/8-100. If income(y) equals 12000 million and the interest rate(r) equals 0.05, calculate the value for the velocity of money.
Finds in a simple regression analysis which demand increases with an increase in advertising also falls as advertising expenditures are reduced.
A tire production company has the fixed costs equal $4,000,000 and the variable cost of production of one tire is $30. Each tire is sold for $70 per piece. what is the break-even production output? how many tires should the company produce to generat..
Should we have drunk driving laws that restrict economic freedom to drink? Why or why not? Should we have seatbelt laws that restrict economic freedom? Why or why not? Your arguments should be entirely based on economic reasoning.
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Describe the distinguishing features of the Canadian governance model. Contrast with the governance model of China.
Coca-Cola and PepsiCo are the leading competitors in the market for cola products. In 1960 Coca-Cola introduced Sprite, which today is the worldwide leader in the lemon-lime soft drink market and ranks fourth among all soft drinks worldwide. Diagram ..
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