Every person has $1,000 to spend. There are two groups of people: 100 sick people and 300 healthy people. A sick person visits the hospital with probability p= 0.25. A healthy person visits the hospital with probability p= 0.05. Any hospital visit costs $400. All individuals have the following expected utility function: EU= (1−p)√Cg+p√Cb
a) What is the actuarially fair price for a sick person? For a healthy person?b)Suppose the insurance company can distinguish between sick and healthy individuals. What price(s) will they charge each group for full insurance?
c)Suppose the insurance company cannot distinguish between sick and healthy individuals. If they charge one price to everyone for full insurance, what price x do they need to charge to make zero expected profits when everyone buys? (Hint: It is somewhere in between the actuarially fair prices, but not halfway since groups are of different sizes.)
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Sara is a manager at a restaurant with employees from different cultural backgrounds. which action of sara could employees perceive as an act of favoritism?
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Wilson center is a private not-for-profit voluntary health and welfare entity. during 2017, it received unrestricted pledges of $638,000, 65 percent of which were payable in 2017, with the remainder payable in 2018 (for use in 2018). officials estimate that 14 percent of all pledges will be uncollectible. a. how much should wilson center report as contribution revenue for 2017? b. in addition, a local social worker, earning $20 per hour working for the state government, contributed 600 hours of time to wilson center at no charge. without these donated services, the organization would have hired an additional staff person. how should wilson center record the contributed service?
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Every person has $1,000 to spend. There are two groups of people: 100 sick people and 300 healthy pe...
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