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Suppose, to begin, that an individual has a. state sub-utility function given by: M!) = $2, Suppose, to begin, that an individual a state su
Suppose, to begin, that an individual has a. state sub-utility function given by: M!) = $2,\
Suppose, to begin, that an individual a state su 1 b-utility where I denotes the income of that individual and > O. fimction given (1) Let 1 denote the probability that the individual is not caught for reckless driving and rr denote the probability that she is caught. 1. Compute the Arrow-Pratt measure of absolute risk-aversion: ARA (1) Page 2
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