Assumption of independence of risks

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Q1. "Why does the assumption of independence of risks matter in the examples of insurance? What would happen to premiums if the probabilities of houses burning were positively correlated? Can you think of a situation where they might be negatively correlated"

Q2. What would happen to the supply and demand of Super Bowl tickets if the government mandated that no more than $20 a ticket could be charged? What would happen if a law passed dictating that kindergarten teachers could make no less than $100,000 per year?

Reference no: EM138676

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