In Eugene, Oregon, Next Year There Is a 2% Chance

question 10

Multiple Choice

In Eugene, Oregon, next year there is a 2% chance of an earthquake severe enough to destroy all buildings and personal property. Quincy, who has $3,000,000 in buildings and personal property, has the opportunity to purchase complete earthquake insurance. Which is true?

• A) Quincy should not purchase earthquake insurance unless he can get it for less than $60,000, because that's all he could possibly lose in an earthquake.
• B) Quincy should not purchase earthquake insurance unless he can get it for less than $60,000, because that's his expected loss in an earthquake.
• C) If Quincy buys earthquake insurance, and an earthquake does not occur, he will have received no utility from the transaction.
• D) What Quincy is willing to pay for the earthquake insurance depends upon his degree of risk aversion.
• E) Quincy should be willing and able to pay up to $3,000,000 for earthquake insurance.

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The practice of engaging individuals in the process by inviting their suggestions, often to foster a sense of ownership and contribution.

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Workers who are given authority, resources, and confidence to take initiative and make decisions within their roles.

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