A Farmer Lives on a Flat Plain Next to a River

question 147

Multiple Choice

A farmer lives on a flat plain next to a river. In addition to the farm, which is worth $F, the farmer owns financial assets worth $A. The river bursts its banks and floods the plain with probability P, destroying the farm. If the farmer is risk averse, then the willingness to pay for flood insurance unambiguously falls when:

• A) F is higher, and A is lower.
• B) P is lower, and F is higher.
• C) F & A are higher.
• D) P is lower, and A is lower.
• E) A is higher, and F is lower.

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Definitions:

Environmental Consequences

The impacts or effects of human activities on the natural environment, including pollution, habitat destruction, and climate change.

Alienation

The feeling of being isolated or estranged from oneself, others, or society as a whole.

Anomie

“Normlessness”; term used to describe the alienation and loss of purpose that result from weaker social bonds and an increased pace of change.

Third Places

Social settings separate from the two usual social environments of home ("first place") and the workplace ("second place") where people can gather and interact.