What is the actuarially fair price of insurance

Assignment Help Business Economics
Reference no: EM13153599

Suppose that every driver faces a 1% probability of an automobile accident every year. An accident will on average cost each driver $10,000. Suppose there are 2 types of individuals:those w/$60,000 in the bank and those with $5000 in the bank. Assume that individuals w/$5000 in the bank declare bankruptcy if they get in a an accident. In bankruptcy, creditors receive only what individuals have in the bank. 1. What is the actuarially fair price of insurance? 2.What price are individuals w/$5000 in the bank willing to pay for the insurance?3. Will those w/$5000 in the bank voluntarily purchase insurance?

Reference no: EM13153599

Economics of scale-barriers created by government

Choose at least three of the barriers to entry listed below that affect the market in which your business operates (or a company of your choice). Explain how these barriers af

Make demand more elastic with respect to price

Which of the following is likely to make demand more elastic with respect to price? Angela consumes only two goods, x and y. Her income doubles and the prices of the two goods

What is effect of corporate income tax on investment level

What is the effect of the corporate income tax on the investment level of a perfectly competitive corporation that finances its investment by debt (with deductible interest) a

Adjust your purchase of peanut butter

You are the manager of a supermarket, and you know that the income elasticity of peanut butter is exactly −0.5. Due to the economic recession, you expect incomes to increase b

How much will blooper receive each month

Football coach Ira Blooper has just been fired as head coach at a large university. His buyout amount is $7.5 million, and Blooper will be repaid (as per his contract) in mont

Simple regression analysis

Briefly explain the meaning of f test why do you think this test is considered to be more important in multiple regression analysis than it is in simple regression analysis.

About the political landmark

Why was the Reform Bill of 1832 a political landmark? A It increased the number of male voters by about fifty percent and set a precedent for widening suffrage further B It gr

Firm has constant marginal-average cost of producing good

The inverse demand curve for widgets is P = 130−2Q. There are two firms, A and B, who produce widgets. Each firm has a constant marginal and average cost of producing the good


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd