Principles Of Microeconomics (book With Myeconlab With Pearson Etext Access Card)
12th Edition
ISBN: 9780134435039
Author: CASE, Karl E.; Fair, Ray C.; Oster, Sharon E.
Publisher: PEARSON
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Question
Chapter 17, Problem 2.6P
To determine
What is the additional information that helps the individual to make a purchasing decision.
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Students have asked these similar questions
Ebony Reigns owns a studio that would cost ¢ 120,000 to replace should it ever be destroyed by fire. There is a 25% chance that the studio could be destroyed by fire during the course of the year. If the fire occurs, Ebony Reign's studio will be worth only ¢ 60,000. An insurance company has offered Ebony a false insurance policy that requires her to pay a yearly premium of ¢ 15,000 in the good state of nature (no fire) Ebony has fully insured her studio to eliminate the risk. Assuming that Ebony Reigns is risk averse has another wealth answer the following questions:
A) Calculate the variance of the value of Ebony's studio with fair insurance.
B) Is Ebony better off with the fair insurance ? Why ?
problem involing moral hazard
If it is impossible to acquire sufficient information to make an informed decision, what can be the least risky option to take?
Using gut feelings
Not doing anything
Do something because something is always better than nothing.
Let someone else make the decision.
Chapter 17 Solutions
Principles Of Microeconomics (book With Myeconlab With Pearson Etext Access Card)
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