3. Suppose that my utility function is given by U=1-0.2D^2, where D is the value of...

3. Suppose that my utility function is given by U=1-0.2D^2, where D is the value of the disease. The first 4 months of the year, we have the flu, where D=2.The next 2 months, we are in perfect health, where D=0. The last 6 months of the year we have a head cold, D=1. What is the value of QALY? Round to THREE decimal points.

4. Suppose that drug A costs 15,000, and it extends life by 5 QALYS. What is the cost effectiveness ratio?

Expert Solution

Rahul Sunny answered 2 years ago

1. Suppose that Lexi preferences are given by the utility function u(x1; x2) = x12x2, where...

1. Suppose that Lexi preferences are given by the utility function u(x1; x2) = x12x2, where x1 denotes bottles of juice, and x2 denotes the number of meat plates. A meat dish costs $15 on average, and bottle of juice is $3. You are told that at these prices Lexi can afford 10 meat plates and 40 bottles of juice per month. i) Derive Lexi optimal consumption bundle. ii) Which of the following two options would Lexi prefer? Show work....

Suppose that Elizabeth has a utility function U= (or U=W^(1/3) ) where W is her wealth...

Suppose that Elizabeth has a utility function U= (or U=W^(1/3) ) where W is her wealth and U is the utility that she gains from wealth. Her initial wealth is $1000 and she faces a 25% probability of illness. If the illness happens, it would cost her $875 to cure it. What is Elizabeth’s marginal utility when she is well? And when she is sick? Is she risk-averse or risk-loving? What is her expected wealth with no insurance? What is...

Given the utility function U ( X , Y ) = X 1 3 Y 2...

Given the utility function U ( X , Y ) = X 1 3 Y 2 3, find the absolute value of the MRS when X=10 and Y=24. Round your answer to 4 decimal places.

Suppose that an individual has a utility function of the form U = Y½ where U...

Suppose that an individual has a utility function of the form U = Y½ where U is utility and Y is income. a) Calculate the utility level for Y values of $10,000, $40,000, $90,000, $160,000, and $250,000 and then plot the individual’s total utility function. b) This individual is currently earning $90,000 but has a 50-50 chance of earning either $40,000 or $160,000 in a new job. i) Calculate the expected income and utility from the new...

Suppose that the utility function is U(c, l) = c^(a) l^(1−a) where < a < 1....

Suppose that the utility function is U(c, l) = c^(a) l^(1−a) where < a < 1. Calculate the slope of an indifference curve for this utility function. What happens to the slope of the indifference curve when c decreases and l increases? Explain.

Suppose that Anu’s utility function is given by U = √10W, where W represents annual income...

Suppose that Anu’s utility function is given by U = √10W, where W represents annual income in thousands of dollars. Suppose that Anu is currently earning an income of $40,000 (I = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. a. Should she take the new job? b. Assume Anu takes the new...

Sophie's utility function is given as U = 2(x1)^(1/2) + 8(x2) where x1 and x2 represent...

Sophie's utility function is given as U = 2(x1)^(1/2) + 8(x2) where x1 and x2 represent the two goods Sophie consumes. Sophie's income is $3400 and the prices are given as x1 = $2 and x2 = $160 a) derive & represent in two separate diagrams the demand for x1 and x2 ( for any income and prices) b) If Sophie's income is increased to $6600, what is the income effect on x1? Is x2 a normal good? Justify your...

Given a utility function: U(q1, q2) = q1 + q 2^2 where q1 and q2 is...

Given a utility function: U(q1, q2) = q1 + q 2^2 where q1 and q2 is the consumption of good 1 and good 2 respectively. and the budget constraint: p1q1 + p2q2 = Y where p1 and p2 are prices of good 1 and good 2 respectively, Y is the consumer’s income a. Holding p2 and Y fixed, find the demand function for good 2. b. Holding p1 and p2 fixed, find the functional form of the Engel curve for...

Amy’s utility function is U = √ C, where C is consumption and is given by...

Amy’s utility function is U = √ C, where C is consumption and is given by C = Income − Expenses. Amy’s income is $10,000 and there is a 5% chance that she will get sick, which would cost $3,600 in medical expenses. (a) (5 points) What is Amy’s expected utility if she doesn’t have insurance? (b) (5 points) What is the actuarially fair premium for a full-coverage insurance plan? What is the actuarially fair premium for an insurance plan...

1. Suppose that an individual has the following utility function, ? = ?^0.5?.?, where U stands...

1. Suppose that an individual has the following utility function, ? = ?^0.5?.?, where U stands for utility and W for Wealth. The individual currently has a net wealth of $400,000. The individual believes there is a 5% chance they will get into a car accident this year. It is expected that a car accident would cost them $100,000 (dropping their overall wealth to $300,000). a) How much would it cost to purchase an actuarially fair insurance policy to cover...

Question