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Elizabeth utility function is given by U=In(4c), where C is consumption. She makes $30,000 per year and enjoys wild outdoor activities.
Elizabeth utility function is given by U=In(4c), where C is consumption. She makes $30,000 per year and enjoys wild outdoor activities.There's a 5% chance that in the next year, she'll break both legs and will incur medical costs of $15,000, and will lose an additional $5,000 from missing work because of the loss of a working pair of legs for some time.
A)estimate the expected income
B) What is the functional form of the expected utility?
C) Estimate the expected utility without insurance?
D) whats the expected with the insurance?
E) Whats the most that the insurance can charge for the actuarially fair premium?
whats the expected utility with the insurance
