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LoJack and Insurance Companies. Consider the application External Benefits from LoJack. Suppose all vehicles in a state carry theft insurance. The benefit from reduced vehicle theft goes to insurance companies because they replace fewer stolen vehicles. Insurance companies do not offer any discounts for customers who install LoJack. The cost of LoJack is $100 per vehicle per year. To simplify matters, assume that the private benefit of LoJack is zero, so the social benefit equals the external benefit. (Related to Application 3 on page 650.)
a. Suppose a single insurance company provides automobile insurance to all vehicles in the state. Will the insurance company provide free LoJacks to at least some of its customers? Explain.
b. Suppose that there are 20 companies in the state, each with a market share of 5 percent. Will the insurance company provide free LoJacks?
c. What is the threshold number of insurance companies the number at which each insurance company will be indifferent about providing free LoJack systems?
Determine what is the state of the economy in brazil versus the united states and discuss the GDP of brazil and the united states?
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Consider the following information about the market for Bayer Heroin-Hydrochloride: P = 10.525 - 0.1QD P= 3.25+1.4QS a. What is the equilibrium market price for heroin b. What quantity of heroin is sold at market price What quantity is demanded
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you earn $30,000 annal income and you are risk averse. every year there is a 10% chance that you will loose $30,000 due to burglary and 90% chance that will loose nothing. Identify the maximum amount you will pay for insurance that completely cove..
Setup a two-variable regression model (i.e. write down the PRF) to examine the impact of per capita disposable income on real per capita gasoline expenditures.
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