Emily and Celeste both work at the same company and earn $10,000 per month. Assume all income is consumed (c). There is a 3% chance that Emily will lose her job and a 6% chance that Celeste will lose her job this month. If either loses her job, she earns $0. Celeste and Emily both have utility function C1/2 Suppose the government provides social insurance to both Celeste and Emily that will fully cover $10,000 of monthly income and charges each a premium $450. Assuming Celeste and Emily are the only participants, what is the expected cost of this program?
Emily and Celeste both work at the same company and earn $10,000 per month. Assume all income is consumed (c). There is a 3% chance that Emily will lose her job and a 6% chance that Celeste will lose her job this month. If either loses her job, she earns $0. Celeste and Emily both have utility function C1/2 Suppose the government provides social insurance to both Celeste and Emily that will fully cover $10,000 of monthly income and charges each a premium $450. Assuming Celeste and Emily are the only participants, what is the expected cost of this program?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Emily and Celeste both work at the same company and earn $10,000 per month. Assume all income is consumed (c). There is a 3% chance that Emily will lose her job and a 6% chance that Celeste will lose her job this month. If either loses her job, she earns $0.
Celeste and Emily both have utility function C1/2
Suppose the government provides social insurance to both Celeste and Emily that will fully cover $10,000 of monthly income and charges each a premium $450. Assuming Celeste and Emily are the only participants, what is the expected cost of this program?
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