1.Jack Strong has $50,000 of wealth. He is participating in a Jujitsu competition. The prize is...

1.Jack Strong has $50,000 of wealth. He is participating in a Jujitsu competition. The prize is $10,000. He is guaranteed to win it (hehasblack belt) unless he breaks his arm. If his arm is broken, he will lose the tournament and he will have to pay $5,000 in medical expenses. Jack thinks that the probability of him breaking his arm during a tournament is 5 percent. He can get a medicalinsurance at a price of $.3 dollars for each $1 of coverage.

a)Write down his consumption if he does not purchase medical insurance.

b)Write down his consumption if he purchases medical insurance.

c)Derive the equation for Jack’s budget constraint.

d)Plot Jack’s budget constraint on the graph.

Expert Solution

SOLUTION :-

Rahul Sunny answered 1 year ago

Pete, a CPA, is participating in an audit engagement of ABC Company. He has performed the...

Pete, a CPA, is participating in an audit engagement of ABC Company. He has performed the audit and has determined that an unqualified/unmodified is to be issued but he would like to expand on the rationale for the unqualified/unmodified opinion. What are the situations in which an explanatory paragraph would be necessary in an unqualified/unmodified opinion.

A consumer with a utility function U = W 1 / 2 (square root of W , wealth) has an initial wealth of $50,000, the cost of illness is $25,000, with the probability of illness p = 0.25

A consumer with a utility function U = W 1 / 2 (square root of W , wealth) has an initial wealth of $50,000, the cost of illness is $25,000, with the probability of illness p = 0.25. a. Calculate an actuarially fair health insurance premium for this consumer. b. Illustrate the consumer's utility and expected utility on a graph. Indicate pure premium, different wealth amounts, etc. c. Can you tell how much extra this consumer will be willing to pay for health...

Jack and Jill are in the checkout line at Walmart. In Jack’s basket he has 4...

Jack and Jill are in the checkout line at Walmart. In Jack’s basket he has 4 DIGIORNO Original Thin Crust Supreme Frozen Pizza and 2 half-gallons of Blue Bell Chocolate Chip Cookie Dough. Jill has in her basket 6 of the DIGIORNO pizzas and 1 half-gallon of the Blue Bell ice cream. You know that the pizza are selling for $5.00 each while ice cream costs $4.00 per half-gallon. If both Jack and Jill are utility maximizers, which of the...

Jack has a utility function u(x,y) = xy, and an endowment of (2,4). He has no...

Jack has a utility function u(x,y) = xy, and an endowment of (2,4). He has no other income. (a) Calculate the demands when the prices are px = 2, py = 4. (b) What are the net demands for the prices from (a)? (c) Let the prices be variables. Calculate the demands as functions of the prices. (d) Now let the prices and the endowments be variables. Calculate the demands as functions of the endowments and the prices.

James has a current wealth of $90,000, including his brand new Cadillac which is worth $50,000....

James has a current wealth of $90,000, including his brand new Cadillac which is worth $50,000. His son just got a driver’s license and Peter is contemplating whether to (i) let his son borrow the Cadillac, or (ii) buy him a used car as a gift. James estimates that the likelihood that his son will total the Cadillac is around 10% and the used car will cost somewhere between $5,000 and $6,000. a. If James’s utility function is given by...

Aspen has been attending an insurance course and if he is a strong student he would inform you that

RISK MANAGEMENT AND INSURANCEAspen has been attending an insurance course and if he is a strong student he would inform you that, from the following items, which circumstance would be deemed as a sustainable defensible and reason for an insurer to dispute a policy subsequent to the end of the contestable policy period?A.A situation where a significant misrepresentation had been made by the insured during the application process.B.The loss ratio of the insurer is operating at a higher rate than...

Jack has determined he will have an annual retirement income deficit. The deficit for the first...

Jack has determined he will have an annual retirement income deficit. The deficit for the first year of retirement, 10 years from now, is $90,000. He expects to be in retirement for 30 years and believes he can earn a 7% after-tax annual return on invested dollars. Inflation is expected to average 4% annually over this same period. What is the amount of lump-sum retirement funds needed by Jack at the beginning of retirement to fund his additional retirement income...

Jack has current year net employment income of $45,000. In addition, he has the following additional...

Jack has current year net employment income of $45,000. In addition, he has the following additional sources of income, gains, and losses: • A loss from an unincorporated business of $23,000. • Interest income of $4,500. • A capital gain of $27,000. • A capital loss of $36,400. • Spousal support paid of $24,000. • A net rental loss of $14,500. Determine Jack's minimum Net Income For Tax Purposes for the current year and indicate the amount and type of...

1. Two countries previously classified as Least Industrialized Nations that are building strong competition with Western...

1. Two countries previously classified as Least Industrialized Nations that are building strong competition with Western nations because of cheap telecommunications and outsourced jobs from multinational corporations are ________ and ________. Select one: a. Vietnam; Indonesia b. China; India c. Japan; Brazil d. Indonesia; Taiwan 2. Global stratification, which of the following best characterize Japan? Select one: a. under developed b. low income c. a monopoly d. High income 3. Who or what are the "Asian Tigers"? Select one: a. the...

Ross has decided that he wants to build enough retirement wealth that, if invested at 5...

Ross has decided that he wants to build enough retirement wealth that, if invested at 5 percent per year, will provide him with $4,400 of monthly income for 30 years. To date, he has saved nothing, but he still has 20 years until he retires. How much money does he need to contribute per month to reach his goal? First compute how much money he will need at retirement, then compute the monthly contribution to reach that goal.

Question