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Mona and Joseph Own a Home

Question 20

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Mona and Joseph own a home. Based on the figure provided, what will be the optimum number of actions (such as smoke detectors and sprinklers) to prevent fire in their house? Mona and Joseph decide to purchase fire insurance that reduces the marginal benefit of taking precautions by $4 at every action level. How will the new policy affect the optimal number of precautions? Mona and Joseph own a home. Based on the figure provided, what will be the optimum number of actions (such as smoke detectors and sprinklers) to prevent fire in their house? Mona and Joseph decide to purchase fire insurance that reduces the marginal benefit of taking precautions by $4 at every action level. How will the new policy affect the optimal number of precautions?

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