part III: Risk and Insurance:

b. Which crop will Kelly choose to plant? Kelly's cousin Xinda is a farmer who faces the same choice as Kelly does, but he has wealth of $200 which he will add to his income from farming in his consumption. Coincidentally, he has the same utility function as Kelly: 110:) = 3%, Where c is the value of consumption. Fill out the following table for Kinda: Xinda: c. What type of risk preferences does Xinda have? d. Which crop will Kinda choose to plant? e. What is the effect of Xinda's wealth on his crop choice? A new cotton mill has opened in a nearby town, and they have decided to offer an insurance contract to cotton farmers in the area. At the beginning of the season, farmers pay a premium of $480. If the weather is GOOD, the insurance will pay nothing to the farmer. If the weather is BAD, the insurance will pay an indemnity payment of $1600 to the farmer. Assume the cotton mill's insurance agents have perfect information about the farmer's activity choice (that is, they can write and enforce a contract that requires the farmer to choose cotton). f. What is the cotton mill's expected prot from this contract? g. What are the expected utilities for planting cotton with insurance for Kelly and Xinda? h. If Kelly is now choosing between planting cotton Without insurance, planting rice, and planting cotton with insurance, what will she choose? i. If Kinda is now choosing between planting cotton without insurance, planting rice, and planting cotton with insurance, what will she choose? 3. Describe one of the 12 indicators of empowerment from the Project-level Women's Empowerment in Agriculture Index (Pro-WEAI) and explain how it can measure one dimension of empowerment. Part III: Risk and Insurance Kelly is a farmer with zero wealth. She can either plant rice or cotton. If she plants cotton, Kelly earns an income of $1600 if the weather is GOOD, and $0 if the weather is BAD. If she plants rice, Kelly will earn an income of $900 under both GOOD and BAD weather. The probability of GOOD weather is 0.7. The probability of BAD weather is 0.3. Kelly's utility mction is u(c) = 3J5, where c is the value of consumption. Use this information to ll out the following table. Kelly: E.......MW Meaty a. What type of risk preferences does Kelly have