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5-9 please! = Given that a consumer's U(C) = vc, the probability of an adverse event is 0.25, and when the adverse even occurs the
5-9 please!
= Given that a consumer's U(C) = vc, the probability of an adverse event is 0.25, and when the adverse even occurs the consumer's consumption is 9 and consumption when the adverse event does not occur is 25, 1. What is the consumer's expected utility? 2. What is the consumer's utility from the expected consumption? 3. Which (1 or 2 above) is larger? a. What does this mean? 4. Please design an insurance product with an actuarially fair premium. a. Show how this product impacts the consumer's outcomes for the adverse and not adverse event 5. Does this product provide full insurance? 6. Would a consumer buy this insurance policy? 7. Would a for-profit insurance company provide this insurance plan? 8. What is the risk premium? 9. And finally, what is the greatest premium that the for-profit insurance company could charge for the insurance product and the consumer would buy it? = Given that a consumer's U(C) = vc, the probability of an adverse event is 0.25, and when the adverse even occurs the consumer's consumption is 9 and consumption when the adverse event does not occur is 25, 1. What is the consumer's expected utility? 2. What is the consumer's utility from the expected consumption? 3. Which (1 or 2 above) is larger? a. What does this mean? 4. Please design an insurance product with an actuarially fair premium. a. Show how this product impacts the consumer's outcomes for the adverse and not adverse event 5. Does this product provide full insurance? 6. Would a consumer buy this insurance policy? 7. Would a for-profit insurance company provide this insurance plan? 8. What is the risk premium? 9. And finally, what is the greatest premium that the for-profit insurance company could charge for the insurance product and the consumer would buy itStep by Step Solution
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