Assumption of independence of risks matter in the examples

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Q1. Why does the assumption of independence of risks matter in the examples of insurance? Illustrate what would happen to premiums if the probabilities of houses burning were definitely correlated? You think of a situation where they might be negatively correlated?

Q2. While waiting in line to buy 2 tacos at 75 cents every also a medium drink for 80 cents, Jordan notices that the restaurant has a value meal containing 3 tacos also a medium drink all for $2.50. For Jordan, the marginal cost of purchasing the third taco would be?

Reference no: EM1312131

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