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Let W represents an individual’s annual earned income and U(W) = (W/10)0.5 is this individual’s von Neumann-Morgenstern utility index (or utility function) . This individual earned income is $49,000. This individual faces the prospect of a 20% chance of needing health care, with a price tag of $13,000. Assume this person is risk averse. Also assume that the insurance company has only claim costs and that administrative costs are $0. The maximum health insurance premium this individual is willing to pay is what number? (Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero and trailing zeros when needed. Use a period for the decimal separator and a comma to separate groups of thousands). Show all steps.
When is a producer's self-interest aligned with the social interest? This is one of the major questions addressed by economic theory. The previous chapter explored the behavior of profit – hungry producers in a perfectly competitive market. Suppose s..
"No firm is completely sheltered from rivals; all firms compete for the consumer dollars. If that is so, then pure monopoly does not exist." Do you agree? Explain. How might you use Chapter 6's concept of cross elasticity of demand to judge whether m..
The production possibilities frontier represents what?
The Microeconomics in Context model:
What will be the CS, PS, tax revenues and deadweight loss? Suppose the government increases the tax to $4 per unit. What will be the new CS, PS, tax revenues and deadweight loss?
According to the absorption approach, does it make any difference whether a nation's currency depreciates when the economy is operating in less than full capacity versus a full capacity?
Explain what determines the level of income, employment, output and prices in our economy. Do you think current monetary and fiscal policy is working to help the U.S. economy achieve the three economic goals of full employment, economic growth, and s..
A production process exhibits economies of scale if:
Explain using the money market graph, what happens when (1) the price level (CPI) goes up, (2) when the discount rate is lowered and (3) when the Fed sells more bonds on the market. What will happen to the equilibrium interest rate in each case.
Discounting future utility is a widely accepted assumption in classical models of inters- temporal choice. Behavioral economics adds to our understanding of time discounting with observations of inconsistent inter-temporal choice. In what sense are i..
Explain how natural monopolies cause market failure? How is the deadweight loss associated with this form of market failure measured? What is a typical form of government intervention to correct it? How effective is this type of intervention?
what is the growth rate of constant- dollar real gdp using year 1 as the base year? What is the growth rate of constant- dollar ral GDP using year 2 as the base year?
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