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

question 224

Multiple Choice

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

• A) buy; by $1,500 lower than
• B) buy; the same as
• C) not buy; $1,500 higher than
• D) not buy; $1,000 higher than

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Definitions:

Brain Activity

The electrical and biochemical actions within the brain, underlying both cognitive and physical functions.

Industrial-Organizational Psychologists

Psychologists who apply psychological theories and principles to workplace environments, aiming to improve productivity, working conditions, and employee well-being.

Workforce

The total number of a country's population employed in the armed forces and civilian jobs, plus those unemployed people who are actually seeking paid work.

Evolutionary Heritage

The traits and characteristics that have been passed down through generations as a result of evolutionary processes.