-Steve Owns a Motorcycle Valued at $5,000 and That Is

question 177

Multiple Choice

-Steve owns a motorcycle valued at $5,000 and that is his only asset. There is a 5 percent chance that Steve will have an accident within a year. If he does have an accident, his motorcycle is worthless. Steve's utility of wealth curve is shown in the figure above. An insurance company agrees to pay Steve the full value of his motorcycle in case of an accident if he buys the company's insurance policy. The company's operating expenses are $500 per policy. If Steve buys the insurance for $1,000, his expected wealth will be ________, and his expected utility will be ________ than with no insurance.

• A) greater; greater
• B) greater; less
• C) less; greater
• D) less; less

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Definitions:

Moral Obligation

A duty or commitment to act in ways that are considered ethically right and beneficial to the larger community.

Ethical Codes

Ethical codes are sets of principles and guidelines designed to help professionals conduct their activities in an honest and ethical manner.

Moralistic Managers

Leaders who prioritize ethical considerations and moral values in their decision-making processes and management styles.

Ambiguous Situations

Scenarios or circumstances that lack clarity and can be interpreted in multiple ways, often leading to uncertainty and confusion in decision making.