Suppose all individuals have a utility function of u = √c, where c is the amount of consumption a person has in any given period. there are two types of people: those at high risk, with a 4% chance of accident, and those at low risk, with a 2% chance of accident. half of individuals are high risk, and half are low risk. the income of all individuals is $40,000 per year, and a catastrophic accident costs $30,000. calculate the actuarially fair full insurance premium for each type of person, assuming the insurance company can identify who is high risk and who is low risk.

6carla would like to buy a dress, a dresser for her bedroom, and a home theater system. she has one month's worth of living expenses in her emergency fund. carla decides to save for the home theater system. did carla make the right decision? why or why not? a. yes; her emergency fund is full and the other items will probably be less expensive. b. yes; she could save more for her emergency fund, but the home theater will be harder to save for. c. no; she should save more for her emergency fund because she has saved less than the recommended amount. d. no; she should have bought the dress and dresser first because she could afford them right away. reset next