8 . Individual Problems 20-4Suppose that every driver faces a 2% probability of an automobile accident every year. An accident will, on average, cost each driver $8,000. Suppose there are two types of individuals: those with $64,000.00 in the bank and those with $2,000.00 in the bank. Assume that individuals with $2,000.00 in the bank declare bankruptcy if they get in an accident. In bankruptcy, creditors receive only what individuals have in the bank. Assume that both types of individuals are only slightly risk averse.In this scenario, the actuarially fair price of full insurance, in which all damages are paid by the insurance company, is.___?____Assume that the price of insurance is set at the actuarially fair price.At this price, drivers with $2,000.00 in the bank likely will or will not buy insurance, and those with $64,000.00 in the bank likely wii or will not buy insurance. (Hint: For each type of driver, compare the price of insurance to the expected cost without insurance.)Suppose a state law has been passed forcing all individuals to purchase insurance at the actuarially fair price.True or False: The law will affect the behavior of both types of drivers.False or True?
8 . Individual Problems 20-4Suppose that every driver faces a 2% probability of an automobile accident every year. An accident will, on average, cost each driver $8,000. Suppose there are two types of
How it works
- Paste your instructions in the instructions box. You can also attach an instructions file
- Select the writer category, deadline, education level and review the instructions
- Make a payment for the order to be assignment to a writer
- Download the paper after the writer uploads it
Will the writer plagiarize my essay?
You will get a plagiarism-free paper and you can get an originality report upon request.
Is this service safe?
All the personal information is confidential and we have 100% safe payment methods. We also guarantee good grades
Recent Comments