Suppose that an economist has a utility function U = (Income)0.25. Her income is $65K a year, but there is a 10 percent chance of becoming ill and making only $57K.
(a)What is her expected utility if she does not have insurance?
(b)What is the actuarially fair insurance premium?
(c)How much is she willing to pay for insurance?

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The Answer of Suppose that an economist has a utility function U = (Income)0.25. Her income is $65K a year, but there is a 10 percent chance of becoming ill and making only $57K.
(a)What is her expected utility if she does not have insurance?
(b)What is the actuarially fair insurance premium?
(c)How much is she willing to pay for insurance?

Suppose That an Economist Has a Utility Function U =