-The Above Figure Shows the Utility of Wealth Curve for a Homeowner

question 155

Multiple Choice

-The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house. If there is a 20 percent chance that the home could be completely destroyed, would this homeowner buy insurance?

• A) No, because the homeowner is not risk averse.
• B) Yes, at any price because the homeowner is risk averse.
• C) Yes, but only if it costs less than $10,000.
• D) Yes, but only if it costs less than $20,000.

---

Definitions:

Non-pecuniary Job Benefits

Non-pecuniary job benefits are perks or advantages of employment that do not involve direct monetary payment, such as a flexible working schedule or health insurance.

Employment Discrimination

Unfair treatment of employees or job applicants based on race, gender, age, religion, nationality, disability, or sexual orientation instead of job qualifications or performance.

Tournament Pay

A compensation structure where rewards are based on relative performance, often used in settings where output is hard to measure individually.

Marginal Revenue Product

The additional revenue generated from using one more unit of a factor of production, holding all other factors constant.