Cameron is currently unemployed and without health


Cameron is currently unemployed and without health insurance coverage. He derives utility (U) from his interest income on his savings (Y) according to the following function: U(Y) = 10(Y^[1/2]) Cameron presently makes about $10,000 of interest income per year. He realizes that there is about a 10 percent probability that he may suffer a stroke. The cost of treatment will be about $3,600 if a stroke occurs. A. Calculate Cameron’s expected utility level without any health insurance coverage. Hint: U(10,000)=1,000 and U(6,400)=800. B. Suppose Cameron must pay $1,900 for health insurance coverage with NRM insurance. Would he buy the insurance? Why or why not?

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Business Economics: Cameron is currently unemployed and without health
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