Use the Following to Answer Question

question 74

Multiple Choice

Use the following to answer question:
-(Scenario: Choosing Insurance) Use Scenario: Choosing Insurance.For $1,000,the Ramirez family can buy insurance that will cover the full cost of repairs.If family members are risk-averse and want to maximize their expected utility,they will: Scenario: Choosing Insurance
The Ramirez family owns three cars and is considering buying insurance to cover the cost of repairs.They face two possible states: in state 1,their cars need no repairs and their income available for purchasing other goods and services is $50,000;in state 2,their cars need $10,000 worth of repairs and their income available for purchasing other goods and services is reduced to $40,000.The probability of repairs is 10%,while the probability of no repairs is 90%.

• A)buy the insurance.
• B)be indifferent between buying and not buying the insurance since their expected income for purchasing other goods and services is $49,000,regardless of what they do.
• C)buy the insurance as long as the utility of having a certain income of $48,000 to buy goods and services other than car repairs is higher than the utility associated with their expected income without insurance.
• D)self-insure.

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Definitions:

Antonio Gramsci

An Italian Marxist philosopher and communist politician known for his theories on cultural hegemony as a means of maintaining the state in a capitalist society.

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The dominance of one group over others, often exercised through a combination of political, economic, or cultural means.

Scholar

An individual who pursues academic and intellectual activities, typically in a field of study or research.

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