Refer to the Data Provided in Table 17 -Refer to Table 17

question 28

Multiple Choice

Refer to the data provided in Table 17.3 below to answer the following question(s) . The table shows the relationship between income and utility for Terri.
Table 17.3
$$\begin{array} { | r | c | } \hline \text { Income } & \text { Total Utility } \\\hline \$ 0 & 0 \\\hline \$ 20,000 & 10 \\\hline \$ 40,000 & 25 \\\hline \$ 60,000 & 45 \\\hline \$ 80,000 & 75 \\\hline\end{array}$$
-Refer to Table 17.3. Suppose Terri has a 25% chance of becoming disabled in any given year. If she does become disabled, she will earn $0. If Terri does not become disabled, she will earn her usual salary of $80,000. Terri has the opportunity to purchase disability insurance for $20,000 which will pay her her full salary in the event she becomes disabled. Terri's utility with the policy is ________ and her expected utility without the policy is ________.

• A) 56.25; 45
• B) 45; 56.25
• C) 45; 18.75
• D) 18.75; 37.5

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Definitions:

Hear

The physiological process involving the ears that allows perception of sounds.

Fetal Response

The reactions or movements made by a fetus in response to stimuli such as sound, light, or pressure.

Light

Electromagnetic radiation that can be perceived by the human eye, playing a critical role in vision and influencing various biological processes.

Conception

The process of fertilization where a sperm cell combines with an egg cell to form a zygote, marking the beginning of pregnancy.