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Suppose an individual has the following utility function defined over wealth: U = U (wealth under square root). The individual has an initial wealth level of $20,000. Initially, the individual has a 20% chance of a heart attack and the loss associated with the attack is $5000. A new drug has been developed that is effective in preventing heart attacks. Taking the drug reduces the chance of a heart attack to 10%, but the loss associated with the attack increases to $10,000.
a. Now what is the expected loss?
b. What is the maximum amount this individual is willing to pay for insurance against a heart attack?
c. What is the risk premium?
d. What is the welfare gain from the insurance? Draw a diagram and label the welfare gain.
Which of the following statements regarding a monopolist is false?
Joe makes monthly deposits of $1,000 into an account with an NAR of 8% and weekly compounding. What will this be worth in 5 years? (This can be done by converting both the rate and payments to weekly, monthly or annually)
Recruitment involves the hiring of prospective employees. Job analysis is a process of obtaining all pertinent job facts, and produces job descriptions and job specifications. Both overlapping responsibility and responsibility gaps should be used whe..
The Millvale Private Insurance Company estimates that that there are 1000 businesses in Millvale that are facing the possibility of $200,000 in flood damage. Half of the businesses are located along the Allegheny River, like the Millvale Boat House, ..
Describe how a manager who derives satisfaction from both income and shirking allocates a 10-hour day between these activities when paid an annual, fixed salary of $130,000. Time spent working: Time spent shirking:
Why is there so much advertising in monopolistic competition and oligopoly? How does such advertising help consumers and promote efficiency? Why might it be excessive at times?
Do not try to explain people's tastes, but they do try to explain what happens when tastes change.
What kind of economies come from reductions in cost due to adoption of technology that has high fixed costs, but lower variable costs?
Consider a firm that has a production function given by Q = 200*L^(.5). Is this production function convex or concave? Does this production function make sense?
What are the potential implications of globalization without consideration of cultural differences on ethical issues? Cite specific examples.
The supply of bottled spring water is very inelastic, but the demand for it is somewhat elastic. What does this imply about the incidence of a tax? Illustrate with a diagram.
One of the limitations of Five Forces is that: Industries with high barriers to entry. Low cost strategies are usually found in industries where. Cigarettes - Price Elasticity of demand = - 0.67
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