Refer to the graph below. It shows 2 indifference curves: for person A and for person B. Which person, A or 4) B, is relatively more likely to take on the risk when the probability of injury at work is 70%? Explain why. Make sure to include the analysis of the difference in the shape of the 2 curves. Be as detailed as possible. Wage UA Us Probability of Injury Figure 1. Indifference Curves of Person A and Person B I.
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- Why is there asymmetric information in the labor market? What signals can an employer look for that might indicate file traits they are seeking in a new employee?Do you think Canada's universal health care program can alleviate problems caused by moral hazard and adverse selection in the private insurance markets? Why or why not? John's utility curve over total wealth is given by U(W) =VW (i.e. square root of W). Suppose that he has a 50% chance of being healthy. If he is healthy, he gets all his wealth-$10,000. If he becomes sick, he only has $3,600 remaining after medical expenditures. Calculate John's wealth and utility when he does and does not get sick, his expected utility, expected wealth, and his expected loss. Now he has the option of buying health insurance Calculate the maximum amount John would be willing to pay to fully insure against the cost of the sickness. How much is the actuarially fair and risk premium? Suppose that society consists of large, equal numbers of identical male and identical female consumers. Male consumers are similar to John; female consumers differ only in that they face a 25% probability of being sick, but…Suppose a particular population has two kinds of health risks, high and low. Let the expected annual health care costs for the high risk be $10,000, and for the low risk, half that. If there are twice as many low risk as high risk individuals, and if the one insurer’s administrative load is 20%, what would the community rated premium be if everyone is compelled to and able to buy health insurance? Note: administrative load can be construed as the amount that the insurer has in costs to run the plans above and beyond the "health care costs."
- Suppose Bethilda earned $30,000 at her last job where she faced a 3% chance of dying on the job. Now Bathilda earns $27,000 at a new job where she faces a 2% chance of dying on the job. What is Bethilda’s implied Value of a Statistical Life? What are the uses of this measure?Tom, who has a utility-of-wealth function U(w) = ln(w + 10), has $500 of income before tax and is taxed at a rate of 25% of earned income. If he is caught underreporting his income he will have to pay the taxes owed and in addition will pay a fine of $2 for every dollar of income he failed to report. How much income will he conceal (i.e., fail to report) if the probability of being caught is 0.1? Also find the market opportunity line and determine the minimum amount of fine such that there is no tax evasion at all.D. If TB > TA then Type B will get more education, otherwise Type A will definitely getmore education. Discuss.E. Assume that the mean wage in Industry 1 is greater than the mean wage in Industry 2,but the variance of wages in Industry 1 is much larger than that in Industry 2. Assumealso that if you get an education you must work in Industry 1(i.e., the human capitalaccumulated is industry specific). What effect(s) might that have on the choices ofType A and Type B individuals regarding their education.F. If αA is much larger than αB, then there is nothing the government can do to induceType B individuals to go to school beyond high school.G. Discuss briefly how your answer to E change if the human capital was not entirelyindustry specific.
- Suppose a municipality were considering a ban on sugary soft drinks. They estimate that 20% of the obesity in the city can be attributed to sugary soft drinks, and thus the ban would be expected to reduce obesity by 20%, citywide. Which measure corresponds to '20%? a. Odds ratio b. Population attributable proportion c. Cumulative incidence d. Relative risk e. Risk difference f. Attributable risk among the exposedA producer collects he initial premium for a healih policy and gives he applicant a conditional receipt. In lhis situation lhe policy becomes effective at which of the following limes? A.When he premium is received in lhe insurance company's home office B.When the policy is delivered C.When the conditions of the receipt are met D.When the premium check clears the bankSuppose a particular population has two kinds of health risks, high and low. Let the expected annual health care costs for the high risk be $10,000 and for the low risk, half that. If there are twice as many low risk as high risk individuals, and if the one insurer's administrative load is 20%, what would the community rated premium be if everyone is compelled to and able to buy health insurance?
- NO CHATGPT. In the US, private health insurance is usually purchased by groups rather than individuals. For example, most people are insured through their employer or their spouse’s employer. Which type of distortion does the insurance company need to worry about with individuals purchasing insurance versus groups? Why is group insurance preferable for the employer? Why is this preferable for the individual?assume there are two types of workers, low- and high-ability, andlet 0 = 0.25 be the proportion of high-ability workers in the population. Assume their marginalproductivity and, therefore, their wages are wh = $20 and wl = $16, and that both types canuse college education to signal high ability. The cost of college education for low-ability workersis cl = $5 whereas the cost for high-ability workers is ch = $2. Consider the wage for both types of workers and the high-ability workers’ college cost, ch. For which values of 0 (the proportion of high-ability workers in the population) do the high-ability workers prefer the separating equilibrium over the pooling equilibrium? (a) Any 0 > 1/2(b) Any 0 < 1/2 (c) Any 0 < 3/4(d) Only when 0 = 1Give typing answer with explanation and conclusion 1. If wH=100 and wL=36 and U(w)=w^1/2. Further, let the reservation utility be 7. (a) What is the minimum probability for which the wage earner accepts the contract? (b)Let p=3/4. What is the maximum cost of effort for which the tenant accepts the contract?