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Question: if there is no uncertainty in society it is possible...

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If there is no uncertainty in society,

it is possible for the probability of being sick to equal 20%
people will be willing to pay high premiums
the expected income when sick will always equal $100
the expected income when healthy will always equal $1 million
the probabilities of being healthy or sick is either 100% or zero %

Which of the following is true? With the assumption of risk-aversion and FAIR insurance, for a given probability of being sick and expected income,

utility with no insurance > utility from partial insurance > utility from full insurance
utility with no insurance > utility from partial insurance = utility form full insurance
utility with no insurance = utility from partial insurance = utility form full insurance
utility with no insurance < utility from partial insurance > utility form full insurance
utility with no insurance < utility from partial insurance < utility from full insurance

In 2018, Bannon's Income when sick = IS , income when healthy = IH , probability of being sick (p). The Expected Income = E(I18)

In 2019, everything is the same except income when healthy is greater than in 2018. It is equal to: IH + a

What will be the difference between E(I19) and E(I18) ?

a

IH + a

a x (p)

a x (1 - p)

a x IS

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