ECON 3210 Chapter 2: SolutionsChapter2.pdf

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9 Feb 2013

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I. [10 marks For each row in the table below, determine what would happen if you opened DrScheme and tried to evaluate the given code. If there is an error, brielly explain what is wrong (be more specific than saying "invalid Scheme expression"). If there is no error, give the value produced by DrScheme. The first two rows have been completed for you as examples. Answer Scheme Code (+ 12) (+ 1 2)) (7 + 12) Error. There is an extra) (+ 4 (* 1 (+ 4 2))) ( 1 ((reraircer 27 9) (sqr 5))) (/ 10 (-3 (-14))) (= 'apple 'banana) (and (< 3 4) 19 10)) (- 12 (string-length. "iya")) (reso rest (rest (rest (cors'a (cons 3 (cons 5 empty))))))) (cond [(> 3 8) "happy! [(-34) 'sad) [(even? 9) 'oops] ) (posn-X (first (rest (coris (make-posn 3 4) (cons (make-posr. 56) empty)))))

QUESTION 1

evidence of Full insurance occurs when

	a.	r > pq
	b.	r = pq
	c.	q = (I_H - I_S)
	d.	q > (I_H - I_S)

3 points

QUESTION 2

Partial and unfair insurance implies:

	a.	q = (I_H - I_S)
	b.	r = pq
	c.	q > (I_H - I_S)
	d.	q < (I_H - I_S)
	e.	r < pq

3 points

QUESTION 3

Full and fair insurance implies

	a.	I^'_H = E(I)
	b.	I^'_S = E(I)
	c.	I_H = E(I)
	d.	I_S = E(I)
	e.	a and b

3 points

QUESTION 4

Points on the straight line that connects I_S and I_H on the actual utility curve refer to utilities ...

	1.	with full insurance
	2.	with partial insurance
	3.	with no insurance
	4.	none of the above

3 points

QUESTION 5

Which of the following is possible?

	a.	utility from full and fair insurance higher than utility from full and unfair insurance
	b.	utility from full and fair insurance lower than utility from full and unfair insurance
	c.	utility from full and fair insurance equal to utility from full and unfair insurance
	d.	a and c

3 points

QUESTION 6

Which of the following is/are possible?

	a.	. utility from full and fair insurance higher than utility from partial and fair insurance
	b.	. utility from full and fair insurance less than utility from partial and fair insurance
	c.	. utility from full and fair insurance equal to utility from partial and fair insurance
	d.	a and

3 points

QUESTION 7

For the insurer, which represents earnings from sick individuals?

	a.	(1 - p ) x r
	b.	p x r
	c.	p (r - q)
	d.	p (q - r)

3 points

QUESTION 8

For the insurer, which represents earnings from non-sick individuals?

	a.	p x q
	b.	p x r
	c.	(1 - p) x r
	d.	q x (I_H - I_S)

3 points

QUESTION 9

Given

p = 10%

q = $80

r = $50

calculate the expected profits of the insurance company.

	a.	$22
	b.	$42
	c.	$32
	d.	none of the above

3 points

QUESTION 10

The policy in the previous question can be described as

	a.	fair insurance
	b.	unfair insurance
	c.	full insurance
	d.	not enough information

3 points

QUESTION 11

In addition to what is given assume I_S = $800.

Assuming full insurance what is the value of I_H ?

	a.	$750
	b.	$880
	c.	$830
	d.	$872

3 points (Extra Credit)

QUESTION 12

Given the information in the last 3 problems, solve for E(I):

	a.	$792
	b.	$872
	c.	$842
	d.	none

13. If the price of X is set at $24.00 per unit, the number of units of X purchased by this consumer each month will be: A) 1 B) 2 C) 3 D) 4 E) 5 F) 6 G) 7 H)8 1) 9 J) 10 K) 12 L) 14 M) 16 N) 18 0) 20 P) 22 Q) 24 R) 26 S) 28 T) 30 U) 36 V) 40 W) 44 X) 52 Y) 56 Z) none of the above

ECON 3210 Chapter 2: SolutionsChapter2.pdf

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