Calculate joe expected utility level

Assignment Help Business Economics
Reference no: EM131910556

 Joe is currently unemployed and without health insurance coverage. He derives utility (U) from his interest income on his savings (Y) according to the following function:

U = 5(Y1/2)

Joe presently makes about $40,000 of interest income per year. He realizes that there is about a 5 percent probability that he may suffer a heart attack. The cost of treatment will be about $20,000 if a heart attack occurs.

  • Calculate Joe's expected utility level without any health insurance coverage.
  • Calculate Joe's expected income without any insurance coverage
  • Suppose Joe must pay a premium of $1,500 for health insurance coverage with ACME insurance. Would he buy the health insurance? Why or why not?
  • Suppose now that the government passes a law that allows all people-not just the self-employed or employed-to have their entire insurance premium exempted from taxes. Joe is in the 33 percent tax bracket. Would he buy the health insurance at a premium cost of $1,500? Why or why not? What implications can be drawn from the analysis?

Reference no: EM131910556

Questions Cloud

Identify the cities with the highest counts of cases : Identify specific cases of people who are infected with a dangerous virus. Your organization has an interest in knowing where the population is most affected
What is the rate of return that the investment : What is the rate of return that the investment will earn for you per year compounded yearly?
Write a summary for discipline of innovation : Write a Summary for Discipline of Innovation 1 page writing .
Discuss the articles thesis or the nature of its sources : The paper may neglect to discuss the article's thesis or the nature of its sources, or its discussion may be wrong of vague.
Calculate joe expected utility level : Calculate Joe's expected utility level without any health insurance coverage.
What budgeting reforms and strategies for budgeting reform : What budgeting reforms and strategies for budgeting reform have been successful in other countries as measured by improved fiscal outcomes
What should be annual coupon of convertible bond : What should be the annual coupon of the convertible bond assuming you want the bond to trade at par? The coupon will be paid semi-annually.
Reasons for volatility in the stock market : Given the current scenario, what would be your advice to someone, who's in their 60's, and is interested in investing in stocks?
Systematic risk and not total risk is important : If it is true, she was wondering, why do we contend that only systematic risk and not total risk is important?

Reviews

Write a Review

Business Economics Questions & Answers

  Firms compete for market share via quantity competition

Assume there are N firms A1 , . . ., AN serving a market with demand given by D(p). Assume that these firms compete for market share via quantity competition. Finally, let cAi (Q) denote the cost function for firm Ai. Describe this environment as a g..

  Consumer surplus and producer surplus

Suppose U.S government officials are concerned about importing beef that might be contaminated with hoof and mouth disease, and they react by restricting beef from Argentina. Explain the impact of this action on price, quanitty, consumer surplus and ..

  What are the potential consequences of a country having

What are the potential consequences of a country having a large overall debt? If you were in the position to implement a solution for the country’s long-term debt, what would it be and why?

  Find the utility maximizing consumption bundle

Harry purchases butterbeer (B) and chocolate frogs (C) and has the following utility function:U(B,C) = min(4B, C). He has $360 to spend on butterbeer and chocolate frogs. Suppose that the price ofbutterbeer is $4 per bottle and the price of chocolate..

  Economic conditions improve in the economy

A nation's real GDP was growing at only 2.0% per year over time. Then economic conditions improve in the economy and its sustained growth rate increases to 2.5%

  Explain with reference to the laffer curve concept

Does federal revenue as a percent of GDP change with changes in tax rates? Explain with reference to the Laffer Curve concept.

  Government wants to run expansionary fiscal policy

The government wants to run expansionary fiscal policy (deficit spending) to achieve full employment. For this purpose, the government wants to provide each unemployed person with a low wage job. Calculate the amount of additional deficit spending (i..

  Why has monetary policy been unable to do the job

Since 2009, the federal reserve has been unable to stimulate the US economy sufficiently enough to generate 3-5% annual growth in GDP, despite being short-term interest rates at zero and instituting a massive quanta give easing program. why has monet..

  Overall increase in organizational loyalty

Which of the following is most likely true with regard to people's views of organizations in contemporary America? In the American workplace, there has been an overall increase in organizational loyalty. Most Americans are confident in their employer..

  Current Default Risk Premium on the Corporate Bonds

Assume that 4-year Treasury Bonds currently have a nominal yield of 6.2%, and 4-year Corporate Bonds have a nominal yield of 8.5%. Further assume that Maturity Risk Premium (MRP) on all 4-year contracts currently is 1.3%, and Corporate Bonds currentl..

  Accumulation leads to rising organic composition of capital

Marx argued that the process of accumulation leads to a rising organic composition of capital. Explain why this matters, both from a theoretical perspective and in terms of real-world implications. Please cite volume and page numbers from Capital.

  Overall-combined profit given the elasticity range

A proposal has been advanced to limit advertising of pharmaceutical prices to prevent unfair pricing by national chains. You estimate that limits on price advertising will change the price elasticity of demand from -5.63 to -4.43. From the pharmacist..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd