Economics For Healthcare Managers
4th Edition
ISBN: 9781640550483
Author: Robert H. Lee
Publisher: Health Administration Pr
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Question
Chapter 4, Problem 10E
To determine
Check whether the person is risk-averter or risk-seeker.
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A risk-averse manager is considering a project that will cost £100. There is a 10 percent chance the project will generate revenues of £100, an 80 percent chance it will yield revenues of £50, and a 10 percent chance it will yield revenues of £500. Should the manager adopt the project? Explain. What will a risk-neutral and risk-loving manager do in the same situation?
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- Greg works as a carpenter. There is a 3 percent chance he loses a finger which they value at $200000. His job makes him $250000. What would the fair premium per $ for Greg to insure against losing his fingers be if his is risk adverse?arrow_forwardIf it is impossible to acquire sufficient information to make an informed decision, what can be the least risky option to take? Using gut feelings Not doing anything Do something because something is always better than nothing. Let someone else make the decision.arrow_forwardBetting on Events Suppose there is a 75% chance of rain tomorrow. You are offered a "contract" that will pay you $1 if it rains tomorrow and $0 if it doesn't. Suppose there is a 75% chance of rain tomorrow. You are offered a "contract" that will pay you $1 if it rains tomorrow and $0 if it doesn't. Question 4 What is the expected (average) value of the contract's payout in dollars?arrow_forward
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