What is Adwoa's present value of seeing the movie tomorrow (one period from now)? What is Adwoa's present value of reading the book, starting tomorrow (one period from now}? Now suppose that B = 0.92 and 6 = 0.5. What is Adwoa's present value of seeing the movie today? What is Adwoa's present value of reading the book, starting today?What is Adwoa's present value of seeing the movie tomorrow (one period from now)? What is Adwoa's present value of reading the book, starting tomorrow [one period from now}? Type II Diabetes is a costly and potentially debilitating disease. The total costs incurred over a lifetime by a person with Type 2 diabetes were recently estimated to be $85,000 - from treating the disease directly, and complications like nerve damage, amputations, and stroke. Consider a simplified model of the market for health insurance, where diabetes is the only future health risk people face. Assume that there are 1,000 people classified as "normal weight" and 1,000 people classified as "overweight." Normal weight people face a 20% chance of developing Type II diabetes in their lifetime, and overweight people a 30% chance. Assume an individual can expect to earn $2,000,000 over the course of their lifetime. Additionally, assume individuals spend all their money on consumption, and u (c) = vc. Ignore any intertemporal considerations of interest rates, inflation or discount factors, i.e. r = 0. What is the amount, x, that each type of individual would be willing to pay for an insurance contract that fully insures them against the lifetime costs of developing diabetes? x (normal weight) = x (overweight) =Suppose insurance companies may measure the weight of an individual prior to offering them an insurance contract, and price their contract based on the result. Assume the only costs the insurance company faces are payments for medical costs if a person develops diabetes, that insurance companies are riskneutral, and that the market for providing insurance is perfectly competitive. What prices for insurance contracts will be offered? p [normal weight) = p (overweight) = Who will purchase insurance? (Select each correct answer.) [3 Normal weight individuals DOverweight individuals [3 Neither What will be the consumer and producer surplus in this market? (Note: If you round off the intermediate results, those rounding errors may be amplied in your final result. We suggest finding exact solutions.) CS: In order to increase fairness and equity, in 1996 lawmakers in Massachusetts enacted a requirement that insurers utilize \"community rating": they must charge everyone the same price. Consider the impact 0fthis policy change. If all individuals purchase insurance. at what price would the insurer break even? p: Who will purchase insurance at this price? (Select each correct answer.) D Normal weight individuals DOverweight individuals [3 Neither Given this. what price will insurers actually set? p: What is happening in this market? What will be the consumer and producer surplus in this market? CS: PS: Compared to when insurers could weigh people prior to offering them a contract [in P51 1 .2.2), what is the deadweight loss from this policy change? [Enter a positive number for a loss.) DWL = In 2006, Governor Mitt Romney enacted "Romneycare," which mandated that all individuals purchase health insurance. Assuming community rating is still in effect. what will be the price ofinsurance? p: What will be the consumer and producer surplus in this market? 082 PS: Compared to when insurers could measure an individual's weight prior to offering them a contract [in PSi 1.2.2), what is the deadweight loss from this policy change?{Enter a positive number for a loss.) DWL = Adwoa's friend tells her that 2001: A Space Odyssey is good. Adwoa is trying to decide between reading the book and watching the movie. Assume that the movie yields an immediate utility of 1 in the single period (single day) during which Adwoa watches it, and a utility of 0 thereafter. Assume that the book yields a utility of 0.1 for each of 100 periods during which she reads it. and a utility ofO thereafter. no Adwoa's utility function at time t is Ut = u (q) + ZHH div. (0,) representing the fact that she discounts the utility of future consumption. First, suppose that ,8 = 0.5 and 6 = 0.92. What is Adwoa's present value of seeing the movie today? What is Adwoa's present value of reading the book, starting today