Question

In: Economics

each worker employed by risky business has a 25 percent chance of losing his or her...

each worker employed by risky business has a 25 percent chance of losing his or her job in the next year. each worker employed bu safe business has a 2 percent chance of losing his or her job. you manage an insurance company that provides a lump sum of $10,000 to each unemployed worker.

a. the minimum amount you would charge risky business for each employee covered by the unemployment policy is $____

b. the minimum amount you would charge sale business for each employee covered by the unemployment policy is $____

c. suppose you charge the same premium to both businesses. the companies have the same number of workers and are required to purchase unemployment insurance. the minimum amount you would charge is. $____

Solutions

Expert Solution

A.

Minimum amount for the risky business = 25%*10000

Minimum amount for the risky business = $2500

B.

Minimum amount for the safe business = 2%*10000

Minimum amount for the safe business = $200

C.

Minimum amount as same premium = (2500+200)/2

Minimum amount as same premium = $1350

Rahul Sunny answered 2 years ago
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