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You are a property insurer and one of your potential clients, whose current wealth is $450,000, wants to insure her $250,000 house. The chances of the house burning down in any given year are one in one thousand. There are no other risks. Will she buy insurance from you if you set the premium at $300? Assume that her utility function is u(W) = ln(W) . How sensitive is the maximum premium she is willing to pay to her current wealth? Calculate the elasticity of the premium to wealth to ?nd out. (Hint: In class we refer to the Markowitz risk premium as the difference between expected wealth and the certainty equivalent, E (W) - CE , which is valid only for fair gambles. In this case, the gamble is not fair, so you should compute the insurance premium as the cost of the gamble, namely, W0 - CE .)
Assume the price elasticity of cigarettes is 0.25. By how much would prices have to increase to get a 20% reduction on smoking?
Production Functions, Labor Markets, and a Small Open Economy. In 2007, the Icelandic economy was in general equilibrium, the supply of labor was a positive function of the real
The textbook states, “Prejudice by itself did not create American slavery.” Examine the forces and events that led to slavery in North America, and the role that racial prejudice p
The attached Eviews results are for a model who has a professional career (dependent variable = pro (1 if respondent has a professional career, 0 otherwise). The data is the 1979 c
My econometrics assignment is due for monday, August 18th. I''m running out of time and need a help to meet the deadline. I need answers for 4 problems from the basic econometrics.
What trends do you see in the Economic, Political, and Cultural environment of society that will affect the industry in the future? Answer) The trends that will affect the indus
what meaning of limit pricing theory and its importance in industrial economics?
In a study relating college grade point average to time spent in various activities, students are asked how many hours they spend each week in four activities: studying, sleeping,
The town of Dusty View, Saskatchewan has only two residents - Justin and Sarah - and has a water supply shortage in the summer. The municipal water utility charges a break even pri
Process of least cost method and how to do a minimisation problem
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