Q4. Ms. İpek wants to make auto insurance for her car worth 250,000 TL. Historical data shows that while the probability of Ms. İpek to have an accident of 50,000 TL in a year is 0.10, the probability of an accident of 200,000 TL is 0.05. If the utility function is u(x)=√x, how much will Ms. İpek be willing to pay for this insurance? (Hint: utility theory)

Q4. Ms. İpek wants to make auto insurance for her car worth 250,000 TL. Historical data shows that while the probability of Ms. İpek to have an accident of 50,000 TL in a year is 0.10, the probability of an accident of 200,000 TL is 0.05. If the utility function is u(x)=√x, how much will Ms. İpek be willing to pay for this insurance? (Hint: utility theory)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.5P

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