Dane has a car valued at 20,000 that gives him a utility of 80. ...

[Mollykgkg]

Dane has a car valued at 20,000 that gives him a utility of 80. There is a 5 percent chance that he will have an accident that will make his car worthless, in which case his utility will be zero. His utility from a wealth of 15,000 is 76.
 
  The maximum amount Dane will be willing to pay for insurance is A) 1,000.
  B) 3,000.
  C) 5,000.
  D) 15,000.

Question 2

The demand for bus service is perfectly elastic at a price of 1.25 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service.
 
  If the government levies a tax on bus rides so that the bus company takes into account the marginal social cost, the tax will be ________ a ride. A) 0.75
  B) 1.60
  C) 1.25
  D) 3.25

[chreslie]

Answer to Question 1

C

Answer to Question 2

A

[Mollykgkg]

Thank you

[chreslie]

Happy to help you