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:

Macular Degeneration

A medical condition that leads to vision loss, specifically in the macula portion of the retina, typically affecting older adults.

Visual Impairment

A condition characterized by the partial or complete loss of vision, which cannot be corrected with standard eyeglasses or contact lenses.

Presbyopia

A common age-related condition in which the eye gradually loses the ability to focus on nearby objects, typically starting around middle age.

Thickening

The process of making a liquid denser or more viscous by adding a substance, often used in cooking or in industrial processes.