-Andrew Has the Utility of Wealth Curve Shown in the Above

question 182

Multiple Choice

-Andrew has the utility of wealth curve shown in the above figure. He owns an SUV worth $30,000, and that is his only wealth. There is a 10 percent chance that he will have an accident within a year. If he does have an accident, his SUV is worthless. Suppose all SUV owners are like Andrew. An insurance company agrees to pay each person who has an accident the full value of their SUV. The company's operating expenses are $1,500. Andrew will ________ the company's policy because the minimum insurance premium that the company is willing to accept is ________ the maximum premium that Andrew is willing to pay.

• A) buy; by $1,500 lower than
• B) buy; the same as
• C) not buy; $500 higher than
• D) not buy; $1,500 higher than

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Definitions:

Tactical Planning

Short-term, specific planning that supports strategic planning, focusing on the actions and resources needed to achieve specific objectives.

Value Propositions

Statements that explain how a product or service solves a need, highlights its benefits, and why it's better than the competition.

E-commerce

The buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet.

Convenience

The ease and usefulness with which a product or service can be used, which can enhance its attractiveness to customers.