Question 6 0 / 1 pts Refer to Scenario 1 Select the correct statement regarding Cammy and Esther's welfare (utility) as a result of the government-provided full insurance. Esther and Cammy both benefit from the insurance and Esther benefits the most. Esther and Cammy both benefit from the insurance and Cammy benefits the most. Neither Esther nor Cammy benefit from the insurance. Cammy benefits from the insurance, Esther does not. Esther benefits from the insurance, Cammy does not.
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Suppose that there are two types of people; those with high rates of health problems and those who are generally healthy. Assume that health insurers cannot distinguish one type from the other and that only the unhealthy types are buying insurance at the given rates. Which of the following would be true if the government mandated that everyone buy health insurance? A. None of the other answers are correct. B. Both types would be worse off. C. Both types would be better off. D. The healthy would be better off and the unhealthy would be no better or worse off. E. The unhealthy would be better off and the healthy would be no better or worse off.
Rashmi S.
Consider two potential buyers of health insurance who purchase health care (preventing any impact on their health) whenever hit by a health shock (much like the potential buyers in question 2). We may therefore think of health shocks as affecting only the potential buyers’ consumption expenditure, and we may describe their utility in any period as a function only of their consumption expenditure. Potential Buyer A’s utility in any state of the world is given by uA(C) = C, and Potential Buyer B’s utility is given by uB(C) = C^0.5, where C equals consumption expenditure in pesos. Each faces three possible states of the world, each of which occurs with a probability of 1/3. In the best state, the potential buyer is hit by no health shock and enjoys C=200. In both the intermediate and worst states of the world, he is hit by a primary health care shock, which reduces his consumption by 30 pesos. In the worst state of the world, he is also hit by a catastrophic health care shock that diminishes his consumption by 60 pesos. In the absence of insurance, then, his consumption falls to 170 in the intermediate state of the world and to 110 in the worst state of the world. An insurer offers two insurance contracts. Contract 1 pays 30 pesos in the event of a primary health shock. Contract 2 pays 60 in the event of a catastrophic health shock. a. What is the expected value of the insurer’s indemnity payout to a buyer under each contract? b. If offered the opportunity to purchase only Contract 1 for a premium of 20, paid before the state is revealed, would Person A accept? Would Person B? Explain. c. If offered the opportunity to purchase only Contract 2 for a premium of 20, paid before the state is revealed, would Person A accept? Would Person B? Explain. d. If offered the opportunity to purchase only one of the two contracts for a premium of 20, would Person A prefer Contract 1, prefer Contract 2, or be indifferent between the two? What about Person B? Explain. e. Explain as intuitively as possible why, for at least one of the two potential buyers, Contract 2 (which offers catastrophic care insurance) is more valuable than Contract 1 (which offers the same expected value of indemnity payments but covers primary care shocks).
Akash M.
According to behavioral economics research, in which of the following cases would we expect a person to experience no net change in their utility? When the person gains $100 and loses $100. When the person gains $250 and loses $100. When the person gains $100 and loses $250. When the person gains $100 while everyone else gains $200. 2. Parker's shares of stock in ACME Corporation lost $30 in value, but his shares in XYZ, Inc. gained $90. According to behavioral economics research, how would Parker feel as a result of these changes? Parker would feel about the same. Parker would feel better off. Parker would feel worse off. Behavioral economics research suggests that the intensity of losses versus gains follows no measurable pattern. 3. Suppose Justine and Sarah are playing the dictator game. Justine is the dictator and has $240 to allocate. Based on repeated experiments of the dictator game, what is the least likely outcome for this game? $240 for Justine and $0 for Sarah. $140 for Justine and $100 for Sarah. $120 for Justine and $120 for Sarah. $0 for Justine and $240 for Sarah.
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