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Suppose a company purchases employers liability insurance to insure against accidents in the workplace. The probability of an accident occurring is 0.02. The insurance company has recommended that the company put on a workplace safety program, which will cost the company $800 to administer.
If the program is implemented correctly, the risk of accidents will reduce by 20 times. The insurance company cannot costlessly observe whether the safety program has been appropriately implemented. In the event an accident occurs, the value of the loss would be $600, 000.
One of the common ways insurance companies address the issue of moral hazard is by introducing deductibles, i.e, the insured party covers certain parts of the losses in the event of an accident. In this case, would the introduction of a 50,000 deductible address the moral hazard problem?
[Think of the expected payments in deductibles the firm has to pay under the two conditions]
A permanent scholarship fund is started through a donation of $750,000. If scholarships totalling $100,000 are awarded each year beginning five years from now, the requuired annual rate of return on the investment is nearest to:
What will cause the gains and losses? Why does the government still use tariffs, even though there is a net loss from tariffs? What do you think "fair" trade me
1. What would happen to the demand curve for movie tickets if the cost of making movies increased sharply?
There are specific circumstances when the project managers are advised to encourage a group judgement rather than rely on their own individual judgement. Critically examine the effectiveness of 4 different types of group discussion in producing bette..
Should he play? What is the lowest probability of a correct guess that would make playing profitable?
Calculate the approximate total tax revenue if all of the coal burned in the United States was burned under a $100/ton carbon dioxide tax. Do this (a) for one year at the present rate and (b) for the total U.S proved reserves. Assume 100% carbon for ..
1. Congress passes a law which requires car manufacturers to reduce emissions during the manufacturing process.
Measles has become an epidemic here in Orange County. About 1 in 1000 people will die after contracting the disease. Because this is such a high rate, health officials in Orange County would be well advised to pay for anyone to get a vaccination.
Why the relationship between price elasticity and the incidence of taxation is important for local government to understand? Specifically, in terms of policy implementation which will involve taxation.
Select any big organisation from a country of your choice and provide the name to your facilitator - no two groups can pick on the same organisation
Assume production is described by Y = BK^alpha X^beta E^gamma L^1-alpha - beta - gamma, where K is capital, X is land, and E is energy. Capital evolves according to a typical Solow model, K^dot = sY - delta K. Land does not grow, X^dot = 0. Energy ev..
As a Business leader you have been asked to develop a short brief on the development experience of your own country (EGYPT): Where in the development theoretical spectrum would you place your own nation ? What are some of your own experiences that su..
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