Answer all the questions below

Good X has an income elasticity of demand of 0.5 and a cross-price elasticity of demand with

respect to Good Y of ? 0.6 . Good X is:

A a normal good and a substitute for Good Y.

B an inferior good and a substitute for Good Y.

C an inferior good and a complement for Good Y.

D a normal good and a complement for Good Y.

X1.8 Which of the following best illustrates the problems of moral hazard?

A A woman becomes less concerned about locking her garage after increasing her buildings

and contents insurance.

B A man chooses not to insure his life because he has no dependants.

C A person effects a long-term disability policy, shortly before taking a course of flying

lessons.

D A company offers cheaper life insurance to women than to men.

A consumer has 4.50 to spend on Mars and Twix chocolate bars. Mars chocolate bars cost

90 pence. Twix bars cost 90 pence. The relevant marginal utilities for the consumer are:

Quantity of

Mars

Marginal utility

of Mars

Quantity of

Twix

Marginal utility

of Twix

1 90 1 50

2 60 2 40

3 40 3 30

4 20 4 20

5 10 5 10

The optimal combination of Mars bars and Twix bars for the consumer to purchase is:

A 1 Mars bar and 4 Twix bars.

B 2 Mars bars and 3 Twix bars.

C 3 Mars bars and 2 Twix bars.

D 4 Mars bars and 1 Twix bars.

The principle of diminishing marginal utility of wealth implies that a risk-averse individual will be

prepared to insure himself against an event:

A even though the expected return is negative.

B only if the expected return is zero.

C only if the expected return is positive.

D only if the event has a high probability of occurrence

Using the data in Exercise 10.5, and assuming a uniform distribution of all decrements in the multiple decrement model, calculate a table of q'"), j = 1, 2, k = 0, 1, 2, 3 (where k is the curtate duration). If u.)(t) is a constant c for 0