What is her expected level of consumption

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Reference no: EM13186734

Moorea spends all of her income on Mochi Frozen Yogurt which costs $1 per cup. She makes $400 per month but lives in a bad neighborhood and is robbed of half her money 20% of the time. Assume YN and YR represent her consumption of yogurt in cups if she is not robbed or robbed and that her utility can be represented by $U(Y_{N},Y_{R})=-(4/5Y_{N})-(1/5Y_{R})$

A. What is her expected level of consumption?

B. Provide a formula describing her constant expected consumption line.

C. What is her preferred bundle given these factors?

D. If insurance costs 30 cents per dollar of coverage, how much insurance will she buy?

Reference no: EM13186734

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