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Consider the market for health insurance. Suppose there are three people. Healthy Hal, Average Al, and Portly Pete. All three of these people will buy health insurance if it costs less than or equal to his actuarily fair insurance rate. Hal's true cost to insure is $5,000, Al's true cost to insure is $10,000, and Pete's true cost is $15,000.a) Suppose the insurance company must offer a single policy to all customers, and it tries to be fair by averaging the costs of its three customers. What premium will it charge? Who will choose to buy insurance at that price?b) Observing who has actually purchased a policy, the insurance company decides to adjust its premium to be the average cost of the observed customers in part (a). What premium will it charge?Which customers will buy insurance at this price?c) Once again, the insurance company observes who actually purchased insurance, and decides to adjust its premium to the average cost of its observed customers in part (b). What premium will charge? Which customers will buy insurance at this price? Is this market efficient? If not, suggestsome mechanism that might improve its efficiency.
For part (a), 1/3(5000+10000+15000)=10000? Al and Pete will buyFor part (b), 1/2(10000+15000)=125000; Pete will buy. The market is not efficient.For part (c), 15000; Pete will buyAm I right for the answers? And what will be the mechanisms to improve the market?
When disparities exist from census information, housing starts data and other research data when seeking for information to help with predicting the power tool market
Frances has lived in an apartment for ten years when she decides to buy a house. Her one-year lease will end on May 1. On April 15, she orally con¬tracts to buy Smith's house for $100,000, with the closing (transfer of the deed) to take place on J..
The university is selling bonds to cover the cost of a new power plant for UAF. The face value on the bonds is $100 million and is to be repaid in 10 years with coupons paid annually. There is a 15% chance the effective interest rate will be 5%, 2..
Assume that nominal income is $35,000 and the price index is 1.20 in year 1. In year 2, nominal income rises to $38,000 and the price index rises to 1.25. What was the percentage change in real income from year 1 to year 2? Make your calculations ..
What kings of long-term benefits and/or costs result from such a strike? Draw some assumptions. Maybe the variables are what is the current wage and how long the strick will last, how much money will be lost.
Calculate the standard error of estimate and the standard error of Coefficient Standard error of estimate = Standard error of Coefficient = 4. Make a prediction of Y when X = 64. Prediction y= 5. Calculate a 95% prediction interval when X = 64. Pre..
In your 1st position as a Finance manager you have been given responsibility for decreasing use of residential heating fuel in state. Choose one of three legislative proposals to accomplish this target
w=10, r=25. The price of output is constant at $50. The production function is f(L,K) = L^.5K^.5.If the current capital stock is fixed at 1600 units, what is L* in the short run How much profit will the firm earn
Determine the long-run effects of this on the quantity of capital per worker and output per worker?(b) In the short run, does aggregate output grow at a rate higher or lower than the growth rate of the labor force?(c) After World War II, growth in r..
Suppose a country has a money demand function (M/P)d = kY, where k is a constant parameter. The money supply grows by 12 per year, and real income grows by 4 percent per year. a) What is the average inflation rate
The Commerce Department said gross domestic product, the broadest measure of goods and services produced in the USA, fell at a 0.3% annual rate in the third quarter. Consumer spending, two-thirds of economic activity, plummeted at a 3.1% rate-the ..
These bonds make annual payments and mature 8 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 14 percent. If the inflation rate was 3.3 percent over the past year, your total real return on thi..
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