actuarilly fair premium
Not what you're looking for?
What is the actuarilly fair premium for full coverage for a treatment. Find the utility with full insurance for the treatment and how much would the individual be willing to pay to obtain such insurance than the fair premium (calculate the risk premium)?
Utility function is given by U=10(X1/3)
CUrrent income is 64000, 10% chance of contracting the disease, cost of treatment $32000
Purchase this Solution
Solution Summary
Actuarilly fair premium for full coverage for a treatment is examined.
Solution Preview
I think the Utility function should be U=10X^(1/3), which is concave - the consumer is risk-adverse.
Two cases:
if there's no disease, he has 64000, of which the utility is ...
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.