10. A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company.

11. If insurance is actuarially fair, the average loss ratio should be close to what value?

12.

Suppose a target price / deficiency payment program is implemented in the market for wheat. How are wheat buyers and sellers affected?

Select one:

a. Wheat buyers are better off and wheat sellers are worse off because the price falls.

b. Wheat buyers are worse off and wheat sellers are better off because the price rises.

c. Wheat buyers and sellers are worse off because price rises for buyers and falls for sellers.

d. Wheat buyers and sellers are better off because price falls for buyers and rises for sellers.

13.

Suppose the US is an importer of tomatoes. Suppose further the US government imposes a tariff on tomatoes. Who would be in favor of this policy?

Select one:

a. US tomato sellers because they can now sell tomatoes at a higher price.

b. Tariffs make US buyers and sellers of tomatoes worse off, so neither group.

c. US tomato buyers because they can now buy cheaper tomatoes.

d. Sellers in other countries exporting tomatoes to the US because they will now receive higher prices.