What is the maximal amount she is willing to pay for health

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Suppose an individual makes $75,000 of income per year. Her utility function is given by , where x is her income minus expenses. She realizes that there is about a 2% probability that she may suffer a heart attack in any given year. The cost of treatment will be $40,000 if a heart attack occurs.

She has the option of buying health insurance, which will cover all expenses in case of a heart attack. What is the maximal amount she is willing to pay for health insurance?

(Note: is a different way of writing the square root of x)

Round all answers (also intermediate answers to 2 decimals).

Reference no: EM132843974

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