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natka813 [3]
2 years ago
10

Suppose people cannot tell for sure whether they will fall ill in any given year. High-risk people correctly perceive their chan

ce of falling ill in a year is 30 percent, and low-risk people correctly perceive that their chance of falling ill is 10 percent. Both high-risk and low-risk people have to pay $10,000 in medical expenses if they fall ill, and nothing if they remain healthy.a. What are the expected annual medical expenses of a high-risk person?$ per yearb. What are the expected annual medical expenses of a low-risk person?$ per yearc. Suppose insurance companies cannot tell whether someone is high-risk or low-risk. They only know that half of all people are high-risk, and half of all people are low-risk. So, they offer a health insurance policy that costs $2,000 per year in exchange for covering all of a person's medical expenses should they fall ill. If high-risk people, and low-risk people are risk-neutral, then who will purchase this insurance policy? Will the insurance company be able to stay in business if it continues to charge $2,000 per year? Briefly explain.(Click to select) Only low-risk people or Neither high-risk nor low-risk people or Only high-risk people or Both high-risk and low-risk people will want to purchase the insurance policy.The insurance company (Click to select) will not or will be able to stay in business because on average the company will (Click to select) break even or pay less to each customer than the revenue it receives from each customer or pay more to each customer than the revenue it receives from each customer .
Business
1 answer:
Crank2 years ago
5 0

The expected annual medical expenses of a high-risk person is $3000 per year while that of a low-risk person is $1000 per year.

The expected annual medical expenses of a high-risk person will be calculated as:

= Probability of falling ill × Expenses in case of illness

= 30% × $10000

= 0.3 × $10000

= $3000

The expected annual medical expenses of a low-risk person will be calculated as:

= Probability of falling ill × Expenses in case of illness

= 10% × $10000

= 0.1 × $10000

= $1000

It should be noted that in a situation where the individuals are risk neutral, the low-risk persons will not buy insurance as only the high-risk individuals will be expected to buy<em> insurance.</em>

Read related link on:

brainly.com/question/25405387

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Swan Finance Company, an accrual method taxpayer, requires all of its customers to carry credit life insurance. If a customer di
posledela

Answer:

Recognize an income/loan repayment of $1,300, and cancel the debt of $200 from the earlier recognition of income

Explanation:

Swan would only recognize an income/loan repayment of $1,300 having already recognized an initial income of $200 of the $1,500 owed before the death of the customer.

Accounting entries would be as follows.

Debit Bank account: $1,500

Credit income/loan repayment account: :1,300

Credit receivables: $200.

The credit of $200 in receivables would be treated as shown above due to the income of $200 already recognised and which would have been treated as follows when it was recognized,

Dr: receivables $200

Cr. interest earned $200,

7 0
3 years ago
With an ATM checking account, you are typically charged a fee if you use teller services (walk-in or drive-through).
romanna [79]

<u>Answer: </u>

With an ATM checking account, you are typically charged a fee if you use teller services is a false statement.

<u>Explanation: </u>

  • The ATM facility has been rolled out in order to dispense convenience to the users of cashless transactions or of withdrawing cash whenever need.
  • This service is not charged as long as there are not any extra facilities demanded like that of international transactions.
  • Charging a fee for using an ATM would decrease the number of its users drastically.
5 0
3 years ago
-At which point are you producing all running shoe
GREYUIT [131]

Answer:

Answer is A,X

Explanation:

3 0
3 years ago
Read 2 more answers
The following data pertain to the Oneida Restaurant Supply Company for the year just ended. Budgeted sales revenue $ 205,000 Act
VikaD [51]

Answer:

Results are below.

Explanation:

Giving the following information:

Budgeted machine hours (based on practical capacity) 10,000

Budgeted direct-labor hours (based on practical capacity) 20,000 Budgeted direct-labor rate $ 13

Budgeted manufacturing overhead $ 364,000

<u>To calculate the predetermined manufacturing overhead rate we need to use the following formula:</u>

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

<u>Machine hours:</u>

Predetermined manufacturing overhead rate= 364,000 / 10,000

Predetermined manufacturing overhead rate= $36.4 per machine hour

<u>Direct labor hours:</u>

Predetermined manufacturing overhead rate= 364,000 / 20,000

Predetermined manufacturing overhead rate= $18.2 per direct labor hour

<u>Direct labor cost:</u>

Direct labor cost= 20,000*13= $260,000

Predetermined manufacturing overhead rate= 364,000 / 260,000

Predetermined manufacturing overhead rate= $1.4 per direct labor dollar

3 0
3 years ago
In a market system: A. a firm's owners are largely shielded from risk because they can walk away from the business at any time.
Karo-lina-s [1.5K]

Answer:

The correct answer is option B.

Explanation:

In a market system, the suppliers and employees are generally shielded from risk. The stockholders and owners of the business are most exposed to risk.

The employees will get their salaries which are fixed and the suppliers will get payments for their supplies. The profits of business owners and stockholders may fluctuate so they are exposed to risk.

The employees and suppliers do not get to share profits but they are shielded from risks.

7 0
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