With a comparative negligence rule (where responsibility for damages is split between the injurer and the victim), both the injurer and victim will take less than the optimal level of care because the expected damages to be paid are less than the expected harm. O True O False Moving to another question will save this response. Question 2 of 20
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- Suppose a particular population has two kinds of health risks, high and low. Let the expected annual health care costs for the high risk be $10,000, and for the low risk, half that. If there are twice as many low risk as high risk individuals, and if the one insurer’s administrative load is 20%, what would the community rated premium be if everyone is compelled to and able to buy health insurance? Note: administrative load can be construed as the amount that the insurer has in costs to run the plans above and beyond the "health care costs."Choice under uncertainty. Consider a coin-toss game in which the player gets $30 if they win, and $5 if they lose. The probability of winning is 50%. (a) Alan is (just) willing to pay $15 to play this game. What is Alan’s attitude to risk? Show your work. (b) Assume a market with many identical Alans, who are all forced to pay $15 to play this coin-toss game. An insurer offers an insurance policy to protect the Alans from the risk. What would be the fair (zero profit) premium on this policy? can you help me for par (b) plase?Choice under uncertainty. Consider a coin-toss game in which the player gets $30 if they win, and $5 if they lose. The probability of winning is 50%. (a) Alan is (just) willing to pay $15 to play this game. What is Alan’s attitude to risk? Show your work.(b) Assume a market with many identical Alans, who are all forced to pay $15 to play this coin-toss game. An insurer offers an insurance policy to protect the Alans from the risk. What would be the fair (zero profit) premium on this policy? i need help with question B please.
- Look again at Figure 21.12. It appears that the investor in panel b can't lose and the investor in panel a can' t win. Is that correct? Note: The solution should not be hand written.Use the following information for questions 12-14. Assume that there are two parties, I and V. I engages in an activity that tends to injure V. V and I both can take care to reduce the expected harm from accidents. Specifically, suppose that if I takes no care (i.e., spends $0 on accident precautions), expected injury to V is $25. If I spends $5 on accident precautions, however, the expected injury to V is reduced to $18. Further suppose that V has a choice between taking no care or spending $4 in care to avoid accidents. If V spends $4 in care, V’s expected harm falls by $2 regardless of the level of care that I takes. Assume that courts adopt the socially-optimal level of injurer care as the negligence standard. That is, if I takes less than the socially-optimal level of care, she will be found negligent and must pay for all damages toV. If I takes at least the socially optimal level of care, she will not have to compensate V for his damages. Under a negligence standard, what is…Use the following information for questions 12-14. Assume that there are two parties, I and V. I engages in an activity that tends to injure V. V and I both can take care to reduce the expected harm from accidents. Specifically, suppose that if I takes no care (i.e., spends $0 on accident precautions), expected injury to V is $25. If I spends $5 on accident precautions, however, the expected injury to V is reduced to $18. Further suppose that V has a choice between taking no care or spending $4 in care to avoid accidents. If V spends $4 in care, V’s expected harm falls by $2 regardless of the level of care that I takes. Assume that courts adopt the socially-optimal level of injurer care as the negligence standard. That is, if I takes less than the socially-optimal level of care, she will be found negligent and must pay for all damages toV. If I takes at least the socially optimal level of care, she will not have to compensate V for his damages. Under a negligence standard, what are…
- Use the following information for questions 12-14. Assume that there are two parties, I and V. I engages in an activity that tends to injure V. V and I both can take care to reduce the expected harm from accidents. Specifically, suppose that if I takes no care (i.e., spends $0 on accident precautions), expected injury to V is $25. If I spends $5 on accident precautions, however, the expected injury to V is reduced to $18. Further suppose that V has a choice between taking no care or spending $4 in care to avoid accidents. If V spends $4 in care, V’s expected harm falls by $2 regardless of the level of care that I takes. Assume that courts adopt the socially-optimal level of injurer care as the negligence standard. That is, if I takes less than the socially-optimal level of care, she will be found negligent and must pay for all damages to V. If I takes at least the socially optimal level of care, she will not have to compensate V for his damages. What is the Nash equilibrium of this…Elena applies for private insurance and resents the number of questions asked on the application. She states that since the primary contribution of insurance companies is to pool the risk of many individuals, they should care less about the characteristics of any one applicant and more about increasing the number of the patients that they insure. Furthermore, she states, when she had insurance through her employer, she hardly had to answer any questions. Use economic reasoning to explain to Elena the insurance company's behaviorSuppose that optimal deterrence of a particular crime requires setting the expected punishment equal to $2000. Assume that the probability of apprehension is fixed at .2 Suppose an offender has a wealth of $5000 and incurs a cost of 1000 per month spent in prison. What combination of a fine and prison term achieves optimal deterrence at the lowest cost? What combination of a fine and prison term is optimal for an offender with a wealth of $7000 (assuming the same monthly cost of imprisonment)? Suppose considerations of fairness dictate that the prison term of offenders who commit the same crime must be the same. What fine and prison term must be imposed on the two offenders to maintain optimal deterrence?
- If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of O A. adverse selection. O B. the principal-agent problem. O C. asymmetric information. O D. moral hazard.Suppose that the buyers do not know the quality of any particular bicycle for sale, but the sellers do knowthe quality of the bike they sell. The price at which a bike is traded is determined by demand and supply.Each buyer wants at most one bicycle.(ii) Assuming that each buyer purchases a bike only if its expected quality is higher than the price,and each seller is willing to sell their bike only if the price exceeds their valuation, what is theequilibrium outcome in this market?Suppose there are two types of people, high ability and low ability. A high-ability person's productivity is valued at wH = $100,000, while a low-ability person's productivity is valued at wL = $50,000. Assume that the employer does not know the ability of a job applicant, but knows that the probability of an applicant being high ability is 50%. Assume next that only high ability applicants can send a signal, i.e., obtain a degree. The employer pays the expected wage. i. What is the wage o er in a pooling equilibrium (no applicant attains a degree)? ii. What is the wage o er in a separating equilibrium (only high-ability applicants attain a degree)? iii. Suppose now both types can attain a degree, but it is costlier to attain for low-ability people and costs them cL = $60,000, while it costs high-ability people cH = $40,000. Is a separating equilibrium where only high-ability people send education as a signal possible? Explain.
