Let us assume the price of the painting is P and there is no art expert you can use (and therefore no second painting), but an insurer offers insurance for your purchase: the insurer will pay you C if the painting is discovered to be fake, and the cost of insurance is 0.5C.

11.How much insurance, C, do you buy?(Your answer is not necessarily a number, but maybe a formula.) Ed's utility from vacations (V) and meals (M) is given by the function U(V,M) = V^2M. Last year, the price of vacations was $200 and the price of meals was $50. This year, the price of meals rose to $75, the price of vacations remained the same. Both years, Ed had an income of $1500. Ed's ordinary demands are V=2I/3pv and M=I/3pM. Where I is income, pV is the price of vacations and pM is the price of meals.

12.Calculate the compensating variation for the price change in meals.

13.Calculate the equivalent variation for the price change in meals.