Conclude a price range mutually beneficial insurance contrac

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Q. Assume your preference function is U = M0.5, you own a house worth $1,000,000 also there is a .001 probability that the house will be damaged also reduces its value to $250,000. Assume Rudy's utility function is U = M. Conclude a price range where there might be a mutually beneficial insurance contract.

Q. The income-consumption curve for Dan between Qa also Qb is given as: Qa = Qb. His budget constraint is given as 120:= Qa + 4Qb. Elucidate how much Qa will Dan consume to maximize utility?

Reference no: EM1322697

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