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Unformatted text preview: a 40% chance it is defective, in which case you would only value it at $4 (it still looks good on you). The watch-maker oﬀers insurance against defects at the price of 20 cents ($0.20) for each dollar of protection. You can buy any amount of this insurance, positive or negative. Let c d and c nd represent your enjoyment of the watch in the cases that it is defective and not defective, respectively. Which equation best characterizes the set of possible combinations of c d and c nd ? (a) c nd = 24-c d 4 (b) c nd = 34-c d 4 (c) c nd = 44-c d 4 (d) c nd = 54-c d 4 1...
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This note was uploaded on 12/26/2011 for the course ECON 100B taught by Professor Kilenthong during the Fall '08 term at UCSB.
- Fall '08