8 . Individual Problems 20-4Suppose that every driver faces a 1% probability of an automobile accident every year. An accident will, on average, cost each driver $11,000. Suppose there are two types of individuals: those with $55,000.00 in the bank and those with $5,500.00 in the bank. Assume that individuals with $5,500.00 in the bank declare bankruptcy if they get in an accident. In bankruptcy, creditors receive only what individuals have in the bank. Assume that both types of individuals are only slightly risk averse.In this scenario, the actuarially fair price of full insurance, in which all damages are paid by the insurance company, is.______Assume that the price of insurance is set at the actuarially fair price.At this price, drivers with $55,000.00 in the bank likely will orwill not buy insurance, and those with $5,500.00 in the bank likely will orwill not buy insurance. (Hint: For each type of driver, compare the price of insurance to the expected cost without insurance.)Suppose a state law has been passed forcing all individuals to purchase insurance at the actuarially fair price.True or False: The law will affect the behavior of both types of drivers.False or True
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more