Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy.The fire statistics indicate that in a given year the probability of property damage in a fire is as follows:
a.If Burger Prince was risk neutral,how much would it be willing to pay for fire insurance?
b.If Burger Prince has the utility values given below,approximately how much would it be willing to pay for fire insurance?
Definitions:
Monopolization
The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.
Antitrust Law
Encompasses regulations that prohibit unfair, anti-competitive practices and monopolistic behavior in the marketplace.
Market Power
The ability of a company or entity to control price or exclude competitors within a specific market.
Clayton Act
A U.S. antitrust law enacted in 1914, aimed at promoting fair competition and preventing monopolies by prohibiting certain actions that could lead to anti-competitive practices.
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