Those with 60000 in the bank and those with 5000 in

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those with $60,000 in the bank and those with $5,000 in the bank. Assume that individuals with $5,000 in the bank declare bankruptcy if they get in an accident. In bankruptcy, creditors receive only what individuals have in the bank. What is the actuarially fair price of insurance? What price are individuals with $5,000 in the bank willing to pay for the insurance? Will those with $5,000 in the bank voluntarily purchase insurance? What is the effect of state laws forcing individuals to purchase auto liability insurance?
Week 8 Chapter 21 Multiple Choice Key 1. c 2. b 3. d 4. b 5. b 6. a 7. c 8. d 9. c 10. b Short Answer 21-1 Real Estate Agents When real estate agents sell their own, rather than clients , houses, they leave the houses on the market for a longer time (10 days longer on average) and wind up with better prices (2% higher on average). Why?
21-3 Incentive Conflicts Which of the following are characteristic of principal-agent conflicts that often exist in a firm? Chapter 22 Multiple Choice Key
Short Answer 22-1 Transfer Pricing Suppose that a paper mill feeds a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $10, the second $9, the third $8, and so on, until the tenth unit increases profit by just $1. The cost the upstream mill incurs for producing enough paper to make one unit of boxes is $3.50.
transfer price (the price the box company pays the paper mill), what price will it set, and how much money will the company make?

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