could you please answer these are they are all very important and it will really help, thumbs up for you
this is applied mirco-economics
Question 1 [25 marks] Ngaire has current disposable income of $2500, including $900 cash in her pocket. With probability to Ngaire's money will be stolen (contingency 1), leaving her with only $1600 to spend on consumption, and with probability to her cash will not be stolen (contingency 2) so she can spend the entire $2500 on consumption. Ngaire is risk-averse with utility-of-money function v(C) = V. (a) What is the expected value of Ngaire's contingent consumption? [3 marks] (b) What is the expected utility of Ngaire's contingent consumption? [4 marks] (c) Suppose we depict Ngaire's preferences in a contingent consumption (CC) diagram, with consumption in contingency 1 measured on the horizontal axis. What would be the slope of Ngaire's indifference curve through her current contingent consumption bundle? (In other words, what is her MRS at this point?) [6 marks] (d) Suppose an insurance company offers to fully insure Ngaire against this risk in exchange for a premium of $95. Therefore, if Ngaire accepts the offer, she will have $2405 to spend in either contingency. By comparing her expected utility with and without insurance, show that Ngaire will accept the offer. [4 marks] (e) What is the expected profit of the insurer? [5 marks] (f) What is Ngaire's MRS at her fully insured contingent consumption bundle? [3 marks] Question 1 [25 marks] Ngaire has current disposable income of $2500, including $900 cash in her pocket. With probability to Ngaire's money will be stolen (contingency 1), leaving her with only $1600 to spend on consumption, and with probability to her cash will not be stolen (contingency 2) so she can spend the entire $2500 on consumption. Ngaire is risk-averse with utility-of-money function v(C) = V. (a) What is the expected value of Ngaire's contingent consumption? [3 marks] (b) What is the expected utility of Ngaire's contingent consumption? [4 marks] (c) Suppose we depict Ngaire's preferences in a contingent consumption (CC) diagram, with consumption in contingency 1 measured on the horizontal axis. What would be the slope of Ngaire's indifference curve through her current contingent consumption bundle? (In other words, what is her MRS at this point?) [6 marks] (d) Suppose an insurance company offers to fully insure Ngaire against this risk in exchange for a premium of $95. Therefore, if Ngaire accepts the offer, she will have $2405 to spend in either contingency. By comparing her expected utility with and without insurance, show that Ngaire will accept the offer. [4 marks] (e) What is the expected profit of the insurer? [5 marks] (f) What is Ngaire's MRS at her fully insured contingent consumption bundle? [3 marks]
