Question
Barney has $80,000 in income per year and faces a 20% chance of having $25,000 in unexpected medical bills. Suppose Barney's utility function over income
Barney has $80,000 in income per year and faces a 20% chance of having $25,000 in unexpected medical bills. Suppose Barney's utility function over income is
U = I1/2
What is Barney's utility under insurance, if the price of insurance is equal to his expected loss (actuarially fair)?
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International Economics
Authors: Robert C. Feenstra, Alan M. Taylor
3rd edition
978-1429278515, 142927851X, 978-1319029517, 1319029515, 978-1429278447
